005.25.03 Ark. Code R. § 001 - ADE 158 - Rules Identifying and Governing the Arkansas Fiscal Assessment and Accountability Program

1.00 AUTHORITY
1.01 The Arkansas State Board of Education's authority for promulgating these rules is pursuant to Ark. Code Ann. § 6-11-105, Ark. Code Ann. § 25-15-201 et seq. and Act 1467 of 2003.
1.02 These rules shall be known as the Arkansas Department of Education Rules Governing the Arkansas Fiscal Assessment and Accountability Program.
1.03 These rules will replace any former Arkansas Department of Education Rules Identifying and Governing School Districts in Fiscal Distress previously adopted.
2.00 PURPOSE
2.01 The purpose of these rules is to establish how the Department and State Board will evaluate, assess, identify, classify and address those school districts in fiscal distress.
3.00 DEFINITIONS - For purposes of these rules, the following terms mean:
3.01 "Annexation"- the joining of an affected school district or districts or parts thereof with a receiving district pursuant to § 6-13-1401.
3.02 "Consolidation" - the joining of two (2) or more school districts or parts thereof create a new resulting school district pursuant to § 6-13-1401.
3.03 "Current Year Expenditures" - the total expenditures accruing to the combined teacher salary, operating, and debt service funds.
3.04 "Current Year Revenues" - the total revenues accruing to the combined teacher salary, operating, and debt service funds.
3.05 "Day" - a calendar day, regardless of whether it is a day the Department is conducting official governmental business.
3.06 "Debt" - a legal liability, encumbrance or contract, to be paid out of future revenues or current reserves of the district.
3.07 "Declining Balance" - the current year expenditures exceeding current year revenues for the combined teacher salary, operating, and debt service funds with balances in the combined funds projected to be no greater than zero in no more than three years. The projected balance will be calculated by an analysis of balances for the previous three years.
3.08 "Department" - the Arkansas Department of Education.
3.09 "The Fiscal Distress Financial Improvement Plan (Plan)" - the written plan submitted by a district classified in fiscal distress and approved by the Department to be implemented by the district addressing each indicator of fiscal distress identified by the Department and the State Board with a specific corrective action plan and timeline.
3.10 "Fiscal Distress Status" - to be identified by the Department and classified by the State Board as being in fiscal distress.
3.11 "Fiscal Integrity" - to comply with financial management, accounting, auditing, and reporting procedures and facilities management procedures as required by state or federal laws and regulations in a forthright and timely manner.
3.12 "Jeopardize" - to expose to loss or injury or peril.
3.13 "Material Failure, Violation, Default, or Discrepancies" - an act, omission, event, circumstances or combination thereof that directly jeopardizes the fiscal integrity of a school district. In other words, but for the material failure, violation, default, or discrepancy, the district's fiscal integrity would not be jeopardized.
3.14 "Public School or School District" - a public school or school district created or established pursuant to Title 6 of the Arkansas Code and subject to the Arkansas Comprehensive Testing Assessment and Accountability Program except specifically excluding those schools or educational programs created by or receiving authority to exist pursuant to A.C.A. § 6-15-501; A.C.A. § 9-28-205 and A.C.A. § 12-29-301 -310, or other provisions of Arkansas law.
3.15 "School Year" - a school year beginning July 1 of one calendar year and ending June 30 of the following calendar year.
3.16 "State Board" - the Arkansas State Board of Education.
3.17 "Reconstitution" - the reorganization of the administrative unit or the governing school board of a school district, including, but not limited to, the replacement or removal of a current superintendent or the removal or replacement of a current school board or both.
4.00 SCHOOL DISTRICT INDICATORS OF FISCAL DISTRESS PURSUANT TO FISCAL ASSESSMENT AND ACCOUNTABILITY PROGRAM
4.01 Any school district meeting any of the following criteria may be identified by the Department to be a school district in fiscal distress upon final approval by the State Board:
4.01.1 A declining balance determined to jeopardize the fiscal integrity of a school district; or
4.01.2 Any act or violation determined to jeopardize the fiscal integrity of a school district, including, but not limited to; or
a. Material failure to properly maintain school facilities;
b. Material violation of local, state, or federal fire, health, or safety code provisions or law;
c. Material violation of local, state, or federal construction code provisions or law;
d. Material state or federal audit exceptions or violations;
e. Material failure to provide timely and accurate legally-required financial reports to the Department, the Division of Legislative Audit, the General Assembly, or the Internal Revenue Service;
f. Insufficient funds to cover payroll, salary, employment benefits, or legal tax obligations;
g. Material failure to meet legally binding minimum teacher salary schedule obligations;
h. Material failure to comply with state law governing purchasing or bid requirements;
i. Material default on any school district debt obligation;
j. Material discrepancies between budgeted and actual school district expenditures;
k. Material failure to comply with audit requirements of § 6- 20-301; or
l. Material failure to comply with any provision of the Arkansas Code that specifically places a school district in fiscal distress based on noncompliance;
4.01.3 Any other fiscal condition of a school district deemed to have a material detrimental negative impact on the continuation of educational services by that school district.
5.00 PROCESS AND PROCEDURE FOR CLASSIFICATION OF FISCAL DISTRESS STATUS
5.01 A school district identified by the Department as being in fiscal distress shall be classified as a school district in fiscal distress upon final classification by the State Board.
5.02 A district classified as in fiscal distress shall be required to publish at least one (1) time for two (2) consecutive weeks in a newspaper of general circulation in the school district the school district's classification as a school district in fiscal distress and the reasons why the school district was classified as being in fiscal distress.
5.02.1 The district shall publish this announcement within 30 calendar days of the final classification by the State Board.
5.02.2 The newspaper of general circulation may be either a daily or weekly newspaper.
5.03 The provisions of subdivisions 5.01 and 5.02 of this section are effective after the school district's appeal rights have been exhausted.
5.04 The decision of the State Board shall be a final order and there is no further right of appeal except the school district may appeal to circuit court in Pulaski County pursuant to the Arkansas Administrative Procedures Act, A.C.A. § 25-15-201, et seq.
6.00 PROCESS AND PROCEDURE FOR NOTIFICATION OF FISCAL DISTRESS STATUS AND APPEAL
6.01 The Department shall provide written notice, via certified mail return receipt requested, to the president of the school board and the superintendent of each school district identified as being in fiscal distress.
6.02 Any school district identified in fiscal distress status may appeal to the State Board by filing a written appeal, with the Office of the Director of the Department, by certified mail return receipt requested, within thirty (30) calendar days of receipt of notice of being identified in fiscal distress status from the Department.
6.03 The State Board shall hear the appeal within sixty (60) calendar days of receipt of the written notice of appeal from the school district.
6.04 The written appeal shall state, in clear terms, the reason why the school district should not be classified as in fiscal distress.
6.05 Notwithstanding any appeal rights in this subchapter, no appeal shall stay the Department's authority to take action to protect the fiscal integrity of any school district identified as in fiscal distress.
7.00 SCHOOL DISTRICT'S FISCAL DISTRESS IMPROVEMENT PLAN PURSUANT TO FISCAL ASSESSMENT AND ACCOUNTABILITY PROGRAM
7.01 Those school districts classified by the State Board as being in fiscal distress shall file, with the Department within ten (10) calendar days after the final classification, a written fiscal distress financial improvement plan to address any area in which the school district is experiencing fiscal distress as identified by the Department.
7.01.1 The plan shall contain, at a minimum, the following elements:
a. Identification of each indicator
b. Specific corrective action steps for each indicator
c. Timeline for each corrective action step
d. Additional action steps the district proposes to take
e. Timeline for each additional action step the district proposed
7.01.2 The Department is authorized to review and amend the plan submitted by the school district.
7.01.3 The Department may edit, amend, update, or replace the plan at any time deemed appropriate.
7.01.4 The districts shall be given notice of the edited, amended, updated, or replacement plan criteria.
7.01.5 The district may appeal any edit, amendment or replacement of a plan by filing its written notice of appeal (which must include an explanation of its concerns) with the Director's Office within ten (10) calendar days of receipt of the notice required in 7.01.4. The appeal shall be heard at the next State Board meeting, and the State Board's decision shall be final.
7.02 Each school district shall first seek and obtain approval of its plan from the Department and shall describe how the school district will remedy those areas in which the school district is experiencing fiscal distress and shall establish the time period by which the school district will remedy all criteria which placed the school district in fiscal distress status.
7.03 A school district in fiscal distress may only petition the State Board for removal from fiscal distress status after the Department has certified in writing that the school district has corrected all criteria for being classified as in fiscal distress and has complied with all Department recommendations and requirements for removal from fiscal distress.
7.04 No school district shall be allowed to remain in fiscal distress status for more than two (2) consecutive school years beginning with the July 1 subsequent to the date the school district was identified as being in fiscal distress status.
7.05 Any school district classified as being in fiscal distress status shall be required to receive on-site technical evaluation and assistance from the Department.
7.06 The Department shall evaluate and make recommendations to the district superintendent regarding staffing of the district and fiscal practices of the district.
7.07 The recommendations of the Department shall be binding on the district, the superintendent, and the school board.
7.08 Every six (6) months, the Department shall submit a written evaluation on the status of each school district in fiscal distress to the State Board.
8.00 PRIOR APPROVAL OF DEBT
8.01 No school district classified in fiscal distress may incur any debt without the prior written approval of the Department
9.00 DEPARTMENT ASSISTANCE AND INTERVENTION IN FISCAL DISTRESS:
9.01 In addressing school districts in fiscal distress, the Department may take any number of the following actions:
9.01.1 Require the superintendent to relinquish all administrative authority with respect to the school district;
9.01.2 Appoint an individual in place of the superintendent to administratively operate the school district under the supervision and approval of the Director of the Department, and to compensate non-department agents operating the school district from school district funding;
9.01.3 Call for the temporary suspension of the local school board;
9.01.4 Require the school district to operate without a local school board under the supervision of the local superintendent or an individual or panel appointed by the Director of the Department;
9.01.5 Place the administration of the school district over to the former board or to a newly elected school board; or
9.01.6 Take any other action allowed by law that is deemed necessary to assist a district in removing criteria of fiscal distress.
9.02 The Department may impose various reporting requirements on the school district. The Department may review any and all school district records and documents.
9.03 The Department shall monitor the fiscal operations and accounts of the school district.
9.04 The Department shall require school district board members and employees to obtain fiscal instruction or training in areas of fiscal concern for the school district at the school district's expense.
10.00 STATE BOARD AUTHORITY:
10.01 After providing thirty (30) calendar days written notice, via certified mail return receipt requested, to a school district, the Department may petition the State Board or the State Board may on its own motion, at any time, take action for the consolidation, annexation, or reconstitution of a school district in fiscal distress or take other appropriate action as allowed by Act 1467 of 2003 in order to secure and protect the best interest of the educational resources of the state or provide for the best interests of students in the school district. The school district shall have a right of appeal to a public hearing before the State Board as provided herein.
10.02 The State Board may approve the petition or take other appropriate action as allowed by this subchapter.
10.03 The State Board shall consolidate, annex, or reconstitute any school district that fails to remove itself from the classification of a school district in fiscal distress within two (2) consecutive school years of receipt of notice of identification unless the State Board, at its discretion, issues a written finding supported by a majority of the board, explaining in detail that the school district could not remove itself from fiscal distress due to impossibility caused by external forces beyond the school district's control.
10.03.1 The two (2) consecutive school years shall commence the July 1 subsequent to classification by the State Board.
10.04 After a public hearing, the State Board shall consolidate, annex, or reconstitute the school district in fiscal distress to another school district or school districts upon a majority vote of a quorum of the members of the State Board, as permitted or required by this subchapter.
10.05 The State Board has exclusive jurisdiction to determine the boundary lines of the receiving or resulting school district and to allocate assets and liabilities of the district.
10.06 The decision of the State Board shall be final with no further right of appeal, except a school district may appeal to circuit court in Pulaski County pursuant to the Arkansas Administrative Procedures Act, § 25-15-201, et seq.

Notes

005.25.03 Ark. Code R. § 001
11/14/2003

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