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Crosby receives a C financial rating; braces for a possible F next year

December 19, 2018

Crosby ISD’s Chief Financial Officer Lesa Jones explained what led to a “C” rating from the Financial Integrity Rating System of Texas for the 2016-17 school year to the board of trustees on Dec. 17.

The first-year CFO also gave insight into factors that could lower district’s rating to an “F” for the 2017-18 school year when released next year.

“That’s not where I want to be. It’s going to take a while for it to get better — it’ll take several years for us to get better,” Jones said. “I’ve been in the school business for 26 years, and in the 16 years of the FIRST rating system I’ve always had an “A.” That will be my goal, to get Crosby’s (rating up) until we’re sporting an “A” and maintaining that rating.”

The FIRST rating system is designed to measure a school district’s financial management.

Jones said the rating system consists of 15 indicators, five of which are critical indicators requiring a yes or no response. The rest of the categories are point-based with 100 possible points.

School districts must score between 60 to 79 points to receive a “C,” also known as standard achievement.

The yes or no critical indicators ask if a district submitted their financial audit report on time to the Texas Education Agency; if their audit report came back unmodified, meaning if there were any changes or problems that needed addressing; if there was any material weakness; if all bills were payed on time; if timely payments were made to the Teachers Retirement System, Texas Workforce Commission and the Internal Revenue Service; and if the district’s total assets exceeded its liabilities.

Crosby ISD answered yes to all five critical indicators for the 2016-17 school year.

2017-18 challenges

However, the district will be required to answer no to a critical indicator for the 2017-18 report, superintendent Scott Davis said.

The audit report will not be ready for submission by the TEA’s deadline of Dec. 28, Davis said.

Submitting the financial audit report on time to the TEA is one of the five critical indicators. If a district does not meet all five they will automatically receive an “F.” Davis and Jones are hoping the audit report will be ready by the regular board meeting Jan. 14.

Jones said not meeting the deadline probably won’t be the only factor that will cause Crosby ISD to receive a low rating next year. The district has laid off more than 100 people and made drastic spending cuts due to a financial crisis this year.

Davis said he has already let TEA officials know they will not be submitting their 2017-18 financial audit report on time. The accuracy of the report is more important than meeting the deadline, he said.

“So I don’t want you to be shocked by that, I don’t want anyone to go ‘wait a minute, what happened?’ We knew exactly what was coming. This audit has to be right. I’m concerned that we get it right,” Davis said.

Other indicators

Crosby ISD did not do so well on other indicators in the 2016-17 report.

One indicator asked if the number of days of cash on hand and current investments in the general fund is sufficient to cover operating expenditures.

This indicator measures how long in days after the end of the fiscal year the school district could have disbursed funds for its operating expenditures without receiving any new revenues.

Crosby scored a 0.

Jones said for the 2015-16 FIRST rating they had 33 days of cash on hand and for the 2016-17 rating the district had 9 days.

“Anything less than 30 days is a 0,” Jones said. “You need to have 90 or more (days) to receive all 10 points.”

Another indicator asked if the school district did not have a 15 percent decline in the student/staff ratio over 3 years.

This indicator is asking if the school district declined the number of staff on the payroll in proportion to the decline in students. In 2015-16 Crosby experienced a .22 percent decrease and a 2.57 percent decrease in 2016-17, respectively.

Crosby received 10 points.

“Basically what the TEA is looking for here is if you have a decline in students, was your decline in staff proportionate to that,” Jones said. “That’s where a lot of school districts get in trouble … because remember payroll accounts for 80 percent of your budget.”

To view the complete 2016-17 FIRST management report, visit the Crosby ISD website

Audit update

Davis also reported an update on the 2017-18 financial audit report.

“The audit draft was given to us. We read it, and we had questions. We had areas where we disagree, we had areas where we wanted to see clarification on the language,” Davis said.

Davis and Jones have been working with former Crosby ISD officials, such as Doug Whitt and Clay Binford to get better clarification on previous district financial actions.

“We’ve pulled them in, and it was some of the language that we’ve had (that) we didn’t agree with it,” Davis said. “We pulled together our comments and we’ve attached that. It was sent to the audit firm last week on Thursday.”

Davis said the audit firm still has the report and it is not yet ready to be presented.

“This has to be right. This must be right. A lot of people are waiting on it. I understand that, but I’m not going to rush something and get it incorrect.”

kaila.contreras@chron.com

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