6-15-2301. Best financial management practices for school districts — Standards — Reviews — Designation of school districts.

6-15-2301. Best financial management practices for school districts — Standards — Reviews — Designation of school districts. (a)(1) The purpose of the best financial management practices reviews is to improve Arkansas school district management's use of resources and to identify cost savings. (2) (A) The Division of Elementary and Secondary Education and Arkansas Legislative Audit are directed to develop a system for reviewing the financial management practices of school districts. (B) In this system, Arkansas Legislative Audit shall assist the division in examining school district operations to determine whether they meet “best financial management code practices”. (b)(1) The best financial management practices adopted by the State Board of Education may be updated periodically after consultation with the Legislative Council, the Governor, the division, school districts, and Arkansas Legislative Audit. (2) The division shall submit to the state board for review and possible adoption proposed revisions to the best financial management practices adopted by the state board and reviewed by the Legislative Council. (3) Revised best financial management practices adopted by the state board shall be used in the next scheduled school district reviews conducted according to this section. (4)(A) The best financial management practices, at a minimum, shall be designed to instill public confidence by: (i) Addressing the school district's use of resources; (ii) Identifying ways that the school district could save funds; and (iii) Improving the school district's performance accountability systems, including public accountability. (B) To achieve these objectives, best practices shall be developed for, but need not be limited to, the following areas: (i) Management structures; (ii) Performance accountability; (iii) Efficient delivery of educational services, including instructional materials; (iv) Administrative and instructional technology; (v) Personnel systems and benefits management; (vi) Facilities construction; (vii) Facilities maintenance; (viii) Student transportation; (ix) Food service operations; (x) Cost control systems, including asset management, risk management, financial management, purchasing, internal auditing, and financial auditing; (xi) Athletics; and (xii) Other extracurricular activities. (c)(1) The division shall conduct the reviews or contract with a private firm selected through a formal request-for-proposal process to perform the review. (2) At least one (1) member of the private firm review team shall have expertise in school district finance. (3) The scope of the review shall focus on the best practices adopted by the state board pursuant to subsection (b) of this section. (d) The state board shall consult with the division throughout the best practices review process to ensure that the technical expertise of the division benefits the review process and supports the school districts before, during, and after the review. (e)(1) Each school district shall be subject to a best financial management practices review. (2) The General Assembly also intends that all school districts shall be reviewed biennially by on-site visits and shall be given one (1) of the following designations: (A) “A”, schools comprehensively complying with best financial practices; (B) “B”, schools complying with best financial practices at significant levels; (C) “C”, schools adequately complying with best financial practices; (D) “D”, schools less than adequately complying with best financial practices; or (E) “F”, schools failing to comply with best financial practices. (3)(A) The division shall prepare annual reports of the results of the best financial management practices reviews and shall post to its website the school and the school district financial grades. (B) The report, which shall be part of the overall school and school district report card requirement pursuant to § 6-15-2006, shall include both revenue sources and expenditures. (C) The reporting of expenditures shall include breakdowns of administrative, instructional, support, and operations expenditures, as well as any other financial commitments of the school and school district. (f) The Legislative Council may adjust the schedule of school districts to be reviewed when unforeseen circumstances prevent initiation of reviews scheduled. (g) Subject to funding by the General Assembly, the division may contract with a private firm to conduct best financial management practices reviews. (h)(1) Reviews shall be conducted by Arkansas Legislative Audit, the division, or the consultant. (2)(A) Funds may be used for the cost of reviews by Arkansas Legislative Audit and private consultants contracted by the state board. (B) Costs may include professional services, travel expenses of the division and of the staff of Arkansas Legislative Audit, and any other necessary expenses incurred as part of a best financial management practices review and as preapproved by the division. (i)(1) A school district shall complete a self-assessment instrument provided by the division that indicates the school district's evaluation of its performance on each best practice. (2)(A) The school district shall begin the self-assessment no later than sixty (60) days before the commencement of the review. (B) The completed self-assessment instrument and supporting documentation shall be submitted to the division no later than the date of commencement of the review as notified by the division. (3) The best practices review team will use this self-assessment information during its review of the school district. (j) During the review, the division or the consultant conducting the review, if any, shall hold at least one (1) advertised public forum as part of the review in order to explain the best financial management practices review process and obtain input from students, parents or guardians, the business community, and other school district residents regarding their concerns about the operations and management of the school district. (k)(1) School district reviews conducted under this section shall be completed within six (6) months after commencement. (2)(A) The division shall issue a final report to the Legislative Council regarding the school district's use of the best financial management practices and cost savings recommendations within sixty (60) days after completing the reviews. (B) Copies of the final report shall be provided to the Governor, the state board, the school district superintendent, and the school district's school district board members. (C)(i) The school district superintendent shall notify the press that the final report has been delivered. (ii) The notification shall state the division's website address at which an electronic copy of the report is available. (l)(1)(A) If the school district is found not to conform to the best financial management practices, the report shall contain an action plan, taking public input into consideration, detailing how the school district could meet the best practices within two (2) years. (B) The school district board of directors shall develop and approve the implementation schedule within sixty (60) days after receipt of the final report. (C) If a school district fails to vote on the action plan within sixty (60) days, the school district superintendent and school district board members shall be required to appear and present testimony before the state board and the Legislative Council. (2)(A) Within sixty (60) days after the receipt of the final report, the school district board of directors shall notify the state board and the division in writing of the implementation schedule for the action plan. (B) The division shall contact the school district, assess the situation, and offer technical assistance, if needed. (m) After a school district board of directors votes to implement the action plan: (1) No later than six (6) months after receipt of the final best financial practices report, the school district board of directors shall submit an initial status report to the Governor, the state board, Arkansas Legislative Audit, the division, and the Legislative Council on progress made toward implementing the action plan and whether changes have occurred in other areas of operation that would affect compliance with the best practices; and (2)(A) A second status report shall be submitted by the school district to the Governor, the state board, Arkansas Legislative Audit, the division, and the Legislative Council no later than six (6) months after submission of the initial report, and every six (6) months thereafter, until status reports are not required. (B) Status reports are not required once the state board concludes that the school district is using the best financial management practices and the school district is designated a grade category “A” for its financial practices. (n)(1) School districts that are determined in their review to be using the best practices and are graded a category “A” pursuant to subsection (e) of this section shall receive a “Seal of Best Financial Management”. (2)(A) The state board designation shall be effective until a school district's financial accountability grade decreases. (B) The state board shall revoke the designation of a school district board of directors at any time if it determines that a school district is no longer complying with the state's best financial management practices. (o) School district boards of directors that receive a best financial management practices review shall maintain records that will enable independent verification of the implementation of the action plan and any related fiscal impacts. (p)(1) Unrestricted cost savings resulting from implementation of the best financial management practices shall be spent at the school and classroom levels for teacher salaries, teacher professional development, improved classroom and school facilities, student supplies, textbooks, classroom technology, and other direct student instruction activities. (2) Cost savings identified for a program that has restrictive expenditure requirements shall be used for the enhancement of the specific program. (3) If the school district is in fiscal distress, the cost savings may be used in accordance with the fiscal distress plan.