Lack of communication, transparency put SD67 in tough financial position, says financial advisor

Joan Axford
Chair James Palanio. (Phil McLachlan - Western News)
Joan Axford. (Phil McLachlan - Western News)
Trustee Dave Stathers. (Phil McLachlan - Western News)

A lack of communication, collaboration and poor understanding regarding budget allocations led School District 67 (SD67) into a tough financial situation, according to an independent financial consultant.

On March 9, SD67 presented and passed their amended 2019/20 budget and are moving on, at least for now.

That night independent financial consultant Joan Axford gave School District 67 her findings into its spending, budget and assets, and a list of recommendations.

Like the previous board meeting dealing with the budget, this one also attracted a large crowd.

In February the School Board voted to bring on an external financial expert to help Okanagan Skaha School District balance its books, after concerns were raised by members of the public and trustees about its financial situation.

READ MORE: School district looks to financial expert to balance books

A few days later they were granted an extension by the Ministry of Education to balance their books and approve their amended 2019/20 budget.

They are were set to submit the 2019/20 amended budget, with the help of a private financial advisor, following the third and final reading of the budget bylaw on March 9.

READ MORE: Ministry grants SD67 extension to balance books, submit amended budget

Axford’s analysis, gathered over the past two weeks, showed a “general communication gap” leading up to the 2019/20 school year put the district into a deficit which was compounded by an unexpected drop in enrolment.

She found the average teacher salary increased significantly, by an average of $1,700 per teacher, equaling a total salary over-expenditure of $2,023,000.

Axford said this should have been monitored, “earlier than it was.”

A substantial purchase of computers cost the district about $1.27 million, which left them a balance at the end of June 2019 of just $71,000.

Over summer 2019, since the 2019/20 budget was first proposed in August ($60,872,080), Axford found there was a $1.125 million decline in funding. This was partially due to a decline in enrolment. This issue however is not a one-off. Axford said a further decline of 187 students is expected next year.

The district started taking action in October ($59,973,041) to try and address their funding shortfall. Their net reduction of expenditures equaled $622,000, and they also oversaw reductions in a few staff members as well as equipment.

When they sold McNicoll Park Middle School, they received 25 per cent of those funds back into local capital, which allowed them charge $850,000 of this year’s purchases to local capital. This leaves them with about $2 million in this account at the end of the fiscal year.

Although financial advisors will continue to provide monthly forecast to the District, their current projection puts the District at a roughly $39,000 deficit by the end of the school year. The District could end the school year in a deficit, however their plan to remedy it would have to first be approved by the Province.

The amended budget of about $60,250,000 presented by the board of trustees and examined by Axford she said shows a “remarkable change” to their previous recorded deficit of $240,000.

Part of Axford’s research found that that the district’s decisions in 2018/19 to manage the operating deficit, combined with their decision to purchase computers for over $1.2 million, strained the district’s finances.

The amended budget plan passed last night proposed the transfer of $300,000 in school-generated funds to the district bank account to help balance the budget, something Okanagan Teachers’ Union President Kevin Epp later referred to as, “taking money from a bake sale.”

Although Axford discovered the transfer, she could not find the specific transaction, which led to a proposed motion and unanimous vote by school board trustees to investigate this further and bring the report to the next business committee meeting.

Before the District allocates these funds, they must ensure the funds originated from the District. They will review the report from District staff at the April board meeting.

If there’s no evidence the district sent money to the schools, then the District will not be allowed to use these monies to help balance the budget.

“They run a field trip or they send your students off to do robotics, and there was a little bit of money left, it goes into one of these fundraising accounts to fund the next field trip that happens,” said Axford.

This $300,000, Axford explained, had been set aside to purchase new mini-buses, but is now used to help balance the budget. In future, she said the district will have to examine purchasing the upgrades through local capital.

“There really shouldn’t be a transfer between the two bank accounts,” she said. “And what has been indicated in this budget is that at some point in time the district, there was a transfer, where by some of the public monies ended up in these fundraising accounts.

“We did some investigation, we haven’t been able to find a transaction, but that is something you may want to ask to be done.”

This deficit has left the school district with no choice other than to follow a “tight, but possible” budget.

Going forward she explained the two areas of the budget most at risk are replacement staffing and utilities.

With regards to communication throughout the process, Axford said there was, “all in all, lots of angst around the budgets that people had” and that the district lacked good communication.

Axford’s list of 12 recommendations included many with regards to openness and transparency, consultation and forecasting for the future.

“This is the kind of thing we’re talking about — about being more transparent — is providing simple things like simple questions and answers that people can use to determine what you’re decisions have been,” she said.

Axford also suggested that enrolment be monitored every week throughout September.

Trustee Dave Stathers apologized and said there are four new “rookie trustees” on the board.

“We’re learning,” he said. “We’re learning lots. So if you could be patient with me and maybe some others, we’re going to be more transparent, I hope, and do a better job in the future.”

A woman from the crowd, who just moved to the area from the Lower Mainland, expressed her disappointment with the board. She questioned why they were in the “27th hour” making last-minute budget decisions. She also suggested it doesn’t feel like the board, “is a team.”

“It doesn’t sometimes, you’re right,” said Chair Palanio.

[Editors note: In a previous version of this story we stated: The school district was also found to have allegedly transferred $300,000 in school-generated funds to the district bank account. This is incorrect. The amended budget plan passed last night proposed the transfer of $300,000 in school-generated funds to the district bank account to help balance the budget. If these funds did not originate from the district, then they will not be allowed to use these monies to help balance the budget. The district is investigating.]


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