A Survey of Mississippi Adequate Education Program Revenues and Selected Expenditures
Executive Summary
In response to a legislative request, PEER conducted a survey of Mississippi Adequate Education Program (MAEP) revenues and selected expenditures during its interim five-year phase-in period in FYs 1998-02. The Committee sought to determine the amount of MAEP revenues and expenditures and the professional and technical service providers and their MAEP and other district program costs during FYs 1998-02.
Mississippi Adequate Education Program
In its 1997 Regular Session, the Mississippi Legislature established the Mississippi Adequate Education Program in order to address local educational funding inequities among the state’s public school districts. The program’s purpose was to ensure that every school district would have sufficient funding to provide every student in the state with at least a Level III accredited school district education. Beginning July 1, 2002, MAEP and its block grant funding approach will replace the state’s Minimum Foundation Program.
As the designated MAEP program manager, the Mississippi Board of Education established policies and procedures governing the approval of program expenditures and disbursements of MAEP funds to the school districts. Appendix A on pages 18-19, this report, discusses each authorized spending option in state law.
In its 1998 Regular Session, the Mississippi Legislature amended the MAEP legislation to establish a Center for Education Analysis as a publicly funded advisory group attached to the Public Education Forum of Mississippi. The Center was to submit annual reports to the Legislature and the Governor with specified statutory information for MAEP capital improvement projects and expenditures in each school district. The Center accomplished this responsibility in FYs 1998-00 but did not accomplish the report in FYs 2001-02 because no funding was appropriated. As a result, the state does not have a complete historical report documenting MAEP achievements.
PEER Survey of Public School Districts
PEER conducted a statewide survey of 151 public school districts, including the agricultural high schools in Coahoma County, Forrest County, and Hinds County, in order to obtain their MAEP revenues and selected expenditures from FYs 1998-02. PEER’s survey excluded one district because the State Auditor declared the district’s records unauditable during some of the survey period.
PEER asked the school districts to report their MAEP accounting fund code numbers/names and the school district expenditures to professional and technical service providers for MAEP and any other district programs. Appendix B on pages 20-24 lists the self-reported MAEP professional and technical service providers by service category and the amounts paid to them.
PEER determined that some reported architect fees included engineering fees. Further, some reported attorney fees included pass-through payments to service providers associated with bond issuance, such as a credit rating agency and the state bond attorney. PEER estimated the unreported costs for these two service providers totaled approximately $258,200, i.e., credit rating agency ($219,700) and state bond attorney ($38,500).
PEER made no judgments about the worth or merit of any reported professional and technical service providers and their costs since it lacked any objective measure for expenditure significance.
MAEP School District Revenues and Expenditures
During FYs 1998-02, the state provided approximately $314.5 million to the public school districts for MAEP capital improvements, technology, instructional needs, and/or program managers. This amount included approximately $4.9 million in interest earned on approximately $309.6 million of state appropriated dollars.
Considering the school districts could use a combination of MAEP spending options, PEER determined that:
170 school districts spent approximately $216.4 million (69% ) in interim or long term pledged funds for new or existing debt service. The pledged amount of MAEP funds could be up to $160 per pupil.
104 school districts (68%) chose cash allotments, making it the most popular program funding option.
111 school districts (73%) spent $158.2 million on the long-term pledge option for State Aid Capital Improvement Bonds with pay off periods up to twenty years. This amount was the largest percentage of MAEP expenditures (50%).
MAEP Expenditures for Professional and Technical Services
From July 1, 1997, through October 31, 2001, the school districts reported spending at least $45.6 million in MAEP funds on professional and technical services, as defined in the State Auditor’s Financial Accounting Manual for Mississippi School Districts. The districts paid 263 firms or individuals to provide professional or technical services in 31 service categories. Some of these firms received approximately $21.2 million in additional public education funds for services provided in other district programs during this period.
The categories of service providers receiving the largest amount of MAEP funds, ranked from highest to lowest, were: (1) architects, (2) attorneys, (3) engineers, (4) construction managers, and (5) architects/engineers. Based on MAEP revenues, the list of top ten service providers included eight architect firms, one law firm, and one construction firm. The architectural firm of Johnson, Bailey, Henderson, & McNeel Architects received the highest total MAEP payments from school districts (approximately $10.5 million).
Administrative Authority of The Mississippi Board of Education
PEER determined that at least one district intends to carry over MAEP funds to the next fiscal year. Because MISS. CODE ANN. Section 37-151-7 (1972) does not address whether carry over funds can or cannot be spent after June 30, 2002, the district is seeking permission from the Mississippi Board of Education to spend these funds in FY 2003 for instructional purposes.
Without commenting on the wisdom of a policy that allows local districts to carry over state funds, the interim program is supposed to conclude by statute on July 1, 2002. Such a policy raises serious questions regarding whether or not the Mississippi Board of Education can authorize a school board to carry over funds from a program that is to end at the close of this fiscal year. Generally, when a statutory authorization for a program expires, the authority to expend funds under the program expires simultaneously.
MAEP Accounting System
The MAEP enabling legislation did not establish any special accounting requirements for the program. MDE used the existing school district accounting system to record the receipts and expenditures for MAEP funds. The department depended on the routine audit system of the State Auditor with a special MAEP compliance audit program to monitor school district compliance with state law.
PEER could not determine school district compliance with their approved long range plans and approved MAEP funding options due to the design of the financial accounting system. In this system, some school districts co-mingled MAEP funds with other school district funds, and MAEP expenditures were not recorded with a statutory spending option code. As a result, the accounting system for school districts cannot produce an annual financial management report that summarizes MAEP receipts and expenditures by spending option, in order to determine compliance with MDE-approved expenditures.
MAEP Audit Process
The State Auditor, working with the Mississippi Department of Education (MDE), established a State Legal Compliance Audit Plan for MAEP that would be accomplished during the annual district audits. The basic audit objectives of this program were to ensure that the school districts were complying with their MDE-approved MAEP Long Range Capital Expenditure Plans and were obtaining approval of the Mississippi Board of Education for any plan modifications prior to expending funds on them.
PEER determined that the state audit process had resulted in at least six of ninety-five audited school districts (6.3%) in FYs 1998-01 receiving findings for program deficiencies. These findings addressed improper project planning/supervision, failure to follow approved plan, incorrect crediting of earned MAEP interest, and the unapproved use of MAEP funds for payroll expenditures.
Recommendations
When enacting new programs for a specific purpose, with a designated lifespan (e.g., MAEP interim phase), the Legislature should mandate accounting controls necessary to provide a clear audit trail which may be used to determine whether funds were expended in accordance with program mandates.
Further, in establishing any such program, the Legislature should designate a state agency to issue an annual report documenting program costs and accomplishments.
The Mississippi Department of Education should request an opinion from the State Attorney General to determine if the Mississippi Board of Education has the authority to authorize a school district to spend any unspent MAEP funds from FYs 1998-02 in FY 2003 and subsequent years.