"A Study of Selected Management and Finance Issues in the Cleveland Public Schools, Cleveland, Ohio,'' Oliver S. Brown Associates

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A'.ITACHMENT A A STUDY OF Sf LECTED MANAGEMENJ' ~ ! ~ [ID . AND . MAY I 1989 FINANCE ISS,t:IES r at_""-.. "' o'clock M CLERK OF COUFfrs-- lJ. S. District Court, fl!.D.O. IN THE CLE\(.f=~~ .. f?.. PUBLIC SCHOOLS . .... Cleveland, Ohio Oliver S. Brown Associates 9 Bowdoin Street Cambridge, MA 02~38 APRIL 198S . . Executive Summary Introduction TABLE OF CONTENTS A. Purpose of the Report B. Scope and Organization of the Report c. Scope and Method of Work D. Background - The Unfinished Compliance Agenda: 1. standard Requirements of the Agenda I-1 2. Relationship Between Agenda Requirements and Performance standards 3. Assessment Format for Performance Standards 4. Developmemt of Performance Standards and Assessment Methodology E. Summary of Conclusions II. Financial Planning and Budgeting A. Introduction B. Agenda system Characteristics c. Analysis of current Status D. System Implementation Effort III. Financial Management A. Introduction B. Agenda System Characteristics c. Analysis of Current Status D. system Implementation Effort II-1 III-1 IV. Management Information v. A. Introduction B. Agenda System Characteristics c. Analysis of current Status D. System Implementation Effort Capital Planning and Budgeting A. Introduction B. Agenda System Characteristics c. Analysis of current Status D. System Implementation Effort Attachments: IV-1 V-1 A. Listing of Documents Supplied to the Consultants A-1 B. c. Other Documents Requested and Response Information System Status Report, January 1989 B-1 C-1 A STUDY OF SELECTED MANAGEMENT AND FINANCE ISSUES IN THE CLEVELAND PUBLIC SCHOOLS EXECUTIVE SUMMARY This study analyzes certain management and finance functions of the Cleveland Public Schools (the "District") and the relationship of those functions to system specifications in the "Management and Finance Component" of the "Unfinished Compliance Agenda" (an instrument developed by the District and the State of Ohio to complete unfinished remedial work in the case of Reed v. Rhodes). The District has been attempting to improve its management and finance practices for much of the last ten years. The "performance standards" which the District has developed, and which the State has approved, as part of the Management and Finance Component are, in fact, general and vague in nature. They specify little in the way of observable and measurable information. Until these "performance standards" are improved, their value as measures of District improvement in the management and finance area will remain very limited at best. Once measurable performance standards are developed, measurement of success will depend in large part upon the development of the information systems referred to below. Page 2 The fundamental management and finance activities of the District can be organized functionally as Financial Planning and Budgeting, Financial Management, Management Information Systems and Capital Planning and Budgeting. It appears that the District has achieved a level of overall financial control through its financial systems, but it is not able to use those same systems to provide management information to support decision-making. An exception to such overall financial control is the District's lack of an automated position control system The financial system is essentially an accounting system that produces the accounting reports required by state law, but it does not generally satisfy the high-priority information needs of the District itself. Major unmet needs include an improved ability to generate systematic short- and long-term expenditure projections, as well as an improved ability to allocate resources according to explicit District priorities, especially in relation to academic programs. The Management Information Systems of the District are (I) I'll$$ intended, conceptually, to support both the educational programs (j) Ffl,t.. in the schools and the management requirements of the leadership of the District. The District appears to have made recent progress in implementing student information systems, but has not successfully addressed problems in financial systems to produce Page 3 timely and accurate financial reports to schools and departments. With the exception of the student information system, there appears to be a significant management problem related to the District's ability to plan and implement computerized information systems. This is particularly true of financial systems. The lack of program-oriented and other truly useful financial information may impede the District's efforts to provide an equitable and productive distribution of resources to all students. The District has initiated a program of capital improvements during the past two years. However, the Board of Education approved a Capital Improvements Plan that was not recommended by the Superintendent, in his capacity as chief executive officer of the District, and has established a decision-making and reporting process which bypasses him. There appears to be no individual with overall responsibility and accountability for the successful completion of the Board's Capital Improvements Plan. Progress to date on student information systems has not been matched by similar progress on financial or capital management and planning. Divisions of responsibility and accountability in these areas appear to have limited progress in achieving desired results. I. Introduction A. Purpose of the Report The purposes of this report are to describe and analyze the present status of selected requirements of the Unfinished Compliance Agenda related to Management and Finance in the Cleveland Public Schools (also the "District") and to assess whether or not the District's approach to developing the systems identified in the Unfinished Compliance Agenda is appropriate for the task. The Unfinished Compliance Agenda is the device which the District and the State of Ohio have chosen to complete their work in complying with the United States District Court's Remedial Order in Reed v. Rhodes. The requirements identified in the Management and Finance component of the Agenda are critical to the overall compliance efforts of the District. The systems specified for implementation include the resource allocation systems, resource distribution systems, and information systems which comprise the core of the financial systems of the District and support all of the educational activities of the District. Their importance within the framework of the United States District Court I-1 Remedial Order of February 6, 1978 is captured in one statement from that Order: Nowhere do the management and administrative skills of the defendants appear more inadequate than in the area of finances. [Remedial Order, C73-1300, 2/6/78, page 98) B. Scope and Organization of the Report The Unfinished Compliance Agenda and the related performance standards document (see sections I-C,I-D,I-F of this report) include a number of components relating to financial systems and information systems. This report has been organized around the following functional areas, with reference to the sections of the Agenda that include these areas: Report Section II. Financial Planning and Budgeting III. Financial Management and Control IV. Management Information systems V. Capital Planning and Budgeting Agenda Component XIII-B XIII-B, XIII-C XIII-E XIII-D This report analyzes the status of the District's efforts in each functional area in terms of the Agenda requirements and related performance standards. I-2 c. Scope and Method of Work: The information for this report was obtained through several methods which included: - initial on-site interviews (August 1988) of District Administrators in key financial and management positions in the District
- responses by a sampling of principals, curriculum and other central office administrators to questions developed by the consultants to the study
- review of selected filings in Reed v. Rhodes
- submission by the District of a number of requested documents in the area of management and finance
and - follow-up on-site interviews (March 1989) of District administrators to verify or modify information obtained from documents and questionnaire responses. D. Background - The Unfinished Compliance Agenda On August 14, 1987, the United States District Court I-3 for the Northern District of Ohio, Eastern Division, in the case of Reed v. Rhodes, approved the "Unfinished Compliance Agenda" document. The Unfinished Compliance Agenda (also, the "Agenda") was developed by the Cleveland Public School District (also, the "District") and the State Department of Education (also, the "State") as a comprehensive statement of the unfinished remedial work under the Court's original Remedial Orders. The primary difference between the Agenda and previous documents relating to remedial work was a focus on the development of management systems, permanent and ongoing rather than a series of one-time tasks or projects. The Unfinished Compliance Agenda has become the operative document used by the Defendants to define and undertake its work in order to comply with the Court's orders. It is the Defendants' self-defined set of management systems which they must plan, develop, implement, and maintain within the organizational structure of the School District, in their effort to comply with the Remedial Orders. In this sense, the Unfinished Compliance Agenda is an integral part of the District's effort to improve its performance in the management and finance area. A key element of the Agenda is the development by the District, with approval by the State, of "performance I-4 standards" for each of the management systems. In its August 14, 1987 Order, the Court stated explicitly, "The success of every system will depend on the establishment of observable, measurable, and rigorous performance standards." (1.1) It is very clear that the performance standards should be real, tangible, verifiable measures of results, and not merely indicators that a process is occurring. Excessive concentration by the District and the State on neat, well-structured packages of systems, without measuring the impact of those systems on the end-product, delivery of effective educational services to all students, runs the risk of missing the mark altogether. 1. Requirements of the Agenda Within each of the functions outlined in Section B, the Agenda describes a set of requirements that each system must meet. These requirements are as follows: Board adopted, codified policies and regulations
Performance standards
Current and coordinated operational controls
Periodic information and training programs
(1.1) Order, August 14, 1987 I-5 Timely provision of information
Annual assessment of attainment of performance standards. In addition, the Agenda calls for a "multiyear, comprehensive, perpetual planning procedure that addresses all educational and education-support service requirements of the District",(1.2) based upon assessment findings and research information. This includes the annual assessment of attainment of all performance standards. This requirement specifies that there must be linkages to policy development, goals and objectives, spending priorities, facility planning, operational plans, desegregation, race equity issues, school climate, new educational development and implementation, and student attendance, retention and discipline. (1.2) 2. Relationship Between Agenda Requirements and Performance Standards The performance standards developed by the District and modified and approved by the State should be fashioned in such a way that they can be used, ultimately, to demonstrate (1.2) -Defendant Cleveland Board of Education's Unfinished Compliance Agenda. January 9, 1987, page XIII-6. I-6 that the District has met the the test of "fulfillment of the underlying duties embodied in the Remedial Order and Final Standards". (1.3) Whereas the Unfinished Compliance Agenda describes requirements in terms of management systems with certain general characteristics for each of the subsections of Component XIII, Management and Finance, one would expect the performance standards to be more specific, measurable indicators of those specified characteristics. This is decidedly not the case with respect to the performance standards for the financial system subcomponents of the Agenda. One example clearly demonstrates the point: Unfinished Compliance Agenda Requirement XIII-B calls for a "System of financial controls for revenue planning, budgeting, accounting and auditing, which supports the Remedial Order implementation, and which projects revenues, budgets for expenditures based upon student enrollment and staffing needs, limits spending and staffing to available funds, allocates funds on the basis of District objectives, identifies cost by program and involves all levels of administration in budget construction." Performance standard XIII-Bl, which is to serve as the measure of the above system's operation is: "Operational fiscal controls system for revenue planning, budgeting, accounting and auditing which limits spending to available funds, allocates by District objectives and involves all levels of administration in budget construction. By November 1989, needs and requirements for the new system defined, system acquired and modifications leading to implementation in place." Unfinished Compliance Agenda Component XIII. Management and Finance, performance standards, dated October 1988. The Agenda reflects general statements of intent. The performance standards should constitute "observable, measurable and rigorous" standards by which it is possible (1.3) Order, August 14, 1987, quoting Order, September 26, 1983 I-7 to determine unambiguously whether the described system is producing the outcome intended. In the above-cited example, the performance standard is merely an extract of key language from the Agenda requirement, and the statements are virtually the same except for the addition of a date in the performance standard. There is no measurable indicator or assessment criteria to further define performance. This would not appear to lend itself to the development of a body of data that supports the Defendants' efforts to achieve compliance and thus would not assist the Defendants in producing "verifiable evidence" thereof to the Court. One example, for purposes of illustration only, of an observable, measurable performance standard related to the foregoing Agenda system on revenue planning and financial control (XIII B.) might be as follows: A monthly revenue report will be provided by the ~ _ 15th of each month to the Board and senior ~~. administration which will contain the major sources of ~~v general and restricted revenue
the monthly and cumulative-to-date plan, actual, and variances
and the projected end-of-year balances, along with a narrative description and analysis of any current or anticipated problems. This report will be operational by December 1989. The matter of vagueness and imprecision is a generic problem throughout the District-authored and State-approved performance standards for Management and Finance Systems. I-8 The performance standards for Unfinished Compliance Agenda systems relating to financial planning, management, and control, management information systems, and capital planning and budgeting are virtually as general as the descriptions of the Agenda systems. This appears to be a significant problem which the Defendants' must address if they hope to use attainment of performance standards as evidence of their progress toward compliance with the Court's Remedial Orders. It is of interest to note that for Fiscal Year 1986-87, the District published a Comprehensive Annual Financial Report ("CAFR") for the first time. According to the District Treasurer, Cleveland was the first major school District in the State to publish such a document. The Association of School Business Officials International (ASBO) presented the District with a Certificate of Excellence in Financial Reporting for this CAFR, based upon a review of the submitted document by ASBO officials and experts in the field. This annual financial report contains much useful information, and could, with appropriate consideration by I-9 the State, itself be used as one of the measurable performance standards in the area of financial management and reporting. (1.4) Yet, the performance standards document and the assessment format document make no reference to the annual financial report or any other such specific indicator which already exists. 3. Assessment Format for Performance Standards The actual measurement of District performance within the Unfinished Compliance Agenda is in the form of annual assessments. The District has developed, and the State approved, an "Assessment Format" for each of the performance standards in the Management and Finance component of the Agenda. Ostensibly, the assessment format calls for data that the District and the State can use to evaluate system performance as identified by performance standards. (1.4) The CAFR is a significant annual financial reporting document recognized as an industry standard that constitutes one aspect of a comprehensive financial management and reporting system. There are numerous other generally-accepted standards and indicators of effective financial management systems that are part of a common body of knowledge within not only school business practice, but financial management as a profession. Extracting a representative set of such standards from this body of knowledge is a routine process for consultants in performing management studies of organizational financial systems. The numerous studies (referred to in the following sections of this study} by outside consultants of the Cleveland Public Schools financial systems consistently identify standards in presenting recommendations. It is somewhat remarkable that the District has not drawn upon information from the numerous studies already conducted to establish commonly-accepted standards for performance. I-10 There is a striking difference in the District's approach to assessment of certain non-financial performance standards and financial performance standards, as embodied in the Assessment Report Format document. For example, subsection XIII-A generally deals with the subject of decentralization, and both the performance standards and the assessment criteria are specific and measurable. One of the performance standards on decentralization relating to personnel appointments (XIII-A3) reads as follows: By November, 1989, data gathered on a representative sample of schools will show that 90% of both certificated and classified personnel appointments to school site positions have been made through a school-based selection process involving both staff and sec members (Policies 4112.1 and 4212.1) The standard has a specific timeline and has a measurable indicator of success, (90% of selected sample meeting criteria). The related assessment methodology is specific as well. A stratified random sample of schools will be selected consisting of 25% of the population of elementary, intermediate and high schools. A review will be conducted of all appointments made to this sample of schools to determine the percentage that were made as the results of the recommendations of a school-based selection committee consisting of both staff and sec members. The assessment report format document identifies the specific data by which attainment of that performance I-11 standard may be demonstrated. It includes counts of appointments in each school of the sample, counts of appointments meeting the criteria, and the percentage relationship between the two. In contrast, the performance standards and assessment formats for financial-related requirements are very general. For example, the performance standard for subsection XIII-B 1, as quoted above on p. I-7, is extremely general. The only specific element of the performance standard is the date, and it only defines a deadline for a process to have been initiated. There are no criteria defined with hard, measurable performance data specified to provide verifiable documentation of performance. Moreover, the State-approved assesssment methodology simply follows the amorphous nature of that financial performance standard: An external and impartial study will be undertaken under the guidance of the Management and Financial Information system Advisory committee (which consists of approximately twelve members of the Greater Cleveland Roundtable and Cleveland School Budget Coalition plus three CBOE administrative staff) to assess the systems development and implementation, in relation to District information needs and requirements, and to report the conclusions of the report to the appropriate parties. [Assessment Report Format, section XIII-Bl, dated December, 1988] The assessment methodology specified for every one of the performance standards in sub-components XIII-B through XIII-F I-12 4. contains this exact language relating to an "external and impartial study".(1.5) Only sub-component XIII-A relating to decentralization, has language on specific, measurable indicators of performance. Thus, it appears that the Defendants' approach to obtaining hard, factual data which measures performance in these critical areas is to commission another study of the process. Development of Performance Standards and Assessment Methodology Interviews with District administrators produced a variety of views on the usefulness of the generalized performance standards and the generic assessment methodology. The Chief of Management, Budget and systems, who has a primary responsibility for implementation of several of the requirements in Component XIII of the Unfinished Compliance Agenda, assisted in the development of the performance standards in the area of Management and Finance. He stated in an interview on March 20, 1989, that a "systems approach" to the process best suited an assessment (1.5) Sections XIII-B through XIII-F of the Agenda relate to financial management and control, the budget decision-making process, personnel-payroll systems, position control systems, asset management, facilities planning and maintenance, capital improvements budgeting, management information systems, and long-range educational, financial and resource allocation planning. I-13 of performance in the area of financial management. He further indicated that ongoing annual studies with the assistance of outside professional advisory groups such as the Management and Finance Advisory Committee would provide the best results. When asked if this meant that the annual assessment of whether the District had met the performance standards for financial management would be based upon the judgements and studies of outside groups or consultants, he responded that it would. The District Treasurer, who is reponsible for the general accounting and treasury functions of the District, stated a clear preference for specific and tangible measures of performance, during on-site interviews on March 20, 1989. He produced the CAFR document for the District and felt that document demonstrated significant progress and improvement in the area of financial management and control. He expressed frustration that it was not clearly recognized by all concerned that the District had made significant progress and improvements in the area of financial administration. In the March 20, 1989 interview, he stated his opinion that Cleveland was "so far ahead of other school Districts", and cited such documented performance as the CAFR, the monthly financial reports to the Board of Education and senior management, and the creation of an I-14 internal audit section reporting to the Treasurer. He also stated that he had very little involvement in establishing the performance standards document. The Research and Analysis Department has the organizational responsibility for conducting annual analyses of the annual assessments of the performance standards. This process was described as an analysis of the data that was gathered and presented by departments responsible for the annual assessment in their own areas. (1.6) The Research and Analysis department reportedly played a significant advisory role in assisting the responsible department heads in developing the data requirements for the annual assessments. The Research and Analysis Department's task was to help identify tangible and measurable data elements for each performance standard, and to advise the department heads in developing realistic performance standards that foster quantitative measurement. In discussing the generic "study group" approach to annual assessments in the Management and Finance area, the process was described as a "needs assessment" rather than a performance assessment. (1. 7) (1.6) Interview with Chief, Research and Analysis Department, March 20, 1989 (1.7) Interview with Chief, Research and Analysis Department, March 20, 1989 I-15 It was not clear how the Research and Analysis Department would be able to conduct .analyses where there was no set of specific data to measure against. The Financial Administrator for the District {who reports directly to the Superintendent) reportedly had no role in the development of the performance standards for the Management and Finance component of the Unfinished Compliance Agenda.(1.8) His primary role is providing monitoring and oversight for the Superintendent in the area of finance, and providing support to other departments on financial issues. He also is involved in Capital Projects as assigned by the Superintendent and in an interview on March 20, 1989, (1.8) Interview with Financial Administrator, March 20, 1989 I-16 stated that he had no role.in the development of performance standards in that area. The Special Assistant to the Superintendent who reportedly participated actively in the District decision process on the performance standards and the assessment format indicated that the generic nature of the performance standards and assessment formats in the Management and Finance section was directly a result of State influence in the approval process. He stated in an interview on March 20, 1989 that the District had initially provided more specific standards and the State required more general standards. The development of the performance standards for the Management and Finance Component XIII appears to have been a disorganized process that did not significantly involve all of the key financial administrators of the District. The resulting set of "performance standards" appear to reflect the uncertainty of the District as to what direction it is taking in these areas. It also appears there has been a significant lack of focused involvement and unity within the senior financial management staff of the District, with respect to the development and approval of the performance standards I-17 relating to Management and Finance. There does not seem to be a clear and consistent understanding, within the organization, of the nature of the performance standards in this area, and the need to establish "observable, measurable, and rigorous performance standards". The following sections of this report focus on the financial and management information topics described in Section I-B of this report, and provide an analysis of the information received from the District relating to its efforts to develop and implement the systems described in the Unfinished Compliance Agenda and the performance standards documents. I-18 E. Summary of Conclusions: The following is a summary of the major conclusions of this study of management and finance issues. 1. Financial Planning and Budgeting Projections of the financial impact of expenditure and revenue trends beyond the current year are produced by the District monthly. They are not a part of a computerized financial planning and modeling system that would provide a systematic approach to long-range financial planning. The goal of having the staffing budget based upon enrollment data is currently being met in the area of school instructional staffing, but it does not appear to be operational in the other staffing areas. The budget process appears to allow for the allocation of funds based upon system-wide goals but there is no evidence in the budget document itself that identifies funding allocations for specific priority goals. Goals are generally stated in terms of programs such as reading, counseling and career guidance, and the like. The budget on the other hand is displayed in terms of schools, with little or no programmatic financial information. The result is that the programmatic goals cannot be matched to the funding allocations by school and function. - A system of program budgeting has not been planned or implemented. This appears not to be a priority goal of the District. Some goals of school-based budgeting appear to be operational in the District with regard to the planning and implementation of budgets at the school level. However, the ability of principals to impact on budget policy decisions which are the basis for per-pupil allocation factors does not appear to be significant. It is difficult to determine what role principals play in the determination of Districtwide funding priorities, since the public budget document does not provide adequate information on funding allocations to priority programs. I-19 2. Financial Management Control over expenditures at the detail level is maintained in a systematic fashion utilizing the capabilities of the computerized financial system, and is supported by appropriate regulations and procedures. However, overall financial control does not appear to be maintained in a similar systematized fashion but must be supported using analytic reporting and controls developed manually. An integrated financial management system including both accounting and control capabilities at all levels of the organization does not exist in the District at the present time. The District does not have a computerized, integrated, personnel, payroll, position-control system to ensure that all staff on the payroll are in budgeted slots. It relies on manual verification for this purpose. Appropriate management level position control reports cannot be produced from existing computer applications. The financial system is a basic school accounting system that generates financial data to comply with State accounting requirements. The computer-based financial system does not provide adequate overall financial control reporting and extensive manual analysis is required to generate such reports. Management level financial reporting is inflexible and does not take advantage of current technology. 3. Management Information The District has made progress in the development and implementation of useful student information systems. There has been little apparent progress in implementing effective financial information systems. The implementation of new information systems in the area of financial management does not appear to be well-planned or well-directed. It is unclear whether this is related to problems in the offices having responsibilities for information systems development or offices having responsibility for financial planning and operations. I-20 4. Capital Planning and Budgeting - The recent progress resulting in funding for capital improvements and adoption of the Board's Plan for overseeing implementation are steps toward establishing a system physical plant and asset control as described in the Agenda. However, the Plan appears to exclude the Superintendent, the administrator with primary responsibility for District governance, from any direct role. The absence of the lead Architect and the separation of responsibility for projects between Building Trades and project architects raises concerns about effective management of the Board's Plan. Specific project status reporting, particularly on the $15.9 million authorized for immediate use, is critical to monitor performance. I-21 II. Financial Planning & Budgeting A. Introduction The financial planning and budgeting systems of a school district set the framework for the financial management and control systems, which include accounting, auditing, financial reporting, and related subsystems. This section will focus on the planning and budgeting processes and systems that establish the overall fiscal framework for the District. The following section will deal with the operational fiscal controls and financial management components of the District. This distinction between planning and budgeting on the one hand and financial management and control on the other provides a useful framework for an analysis of the Unfinished Compliance Agenda Management and Finance systems and the October, 1988 "performance standards" document for the following reasons: 1. The financial planning and budgeting systems provide the framework for the definition of the II-1 fiscal policies of the Board of Education. As such, these systems must reflect the reality of the primary educational and support service programs of the District. 2. The accounting, auditing, financial control, and financial reporting systems are tools used to classify, categorize, accumulate, analyze, and disseminate information about the financial transactions that occur within the framework of the budgeting and financial planning systems. They are the tools for measuring financial performance against the financial standards. 3. It is very possible to have a well-structured, operational, and clearly understood financial planning and budgeting system, and have a poorly designed, ineffective accounting and reporting system, with the result that actual performance is never measured against standards. The reverse is also true. Finally, it is possible, and in fact common, to have both systems operating fairly effectively but separately (i.e.,plan by program, prepare the budget by school and object, and account for cost by function and object). II-2 B. Agenda System Characteristics: Financial planning and budgeting systems are described primarily in Subsection B (Fiscal Controls) of the Management and Finance component of the Unfinished Compliance Agenda. There also are related elements in Subsection A (Decentralization of Decision-making). These system characteristics are general in nature and may be summarized as follows: 1. Revenue and expenditure projections
2. Staffing budget based on enrollment projections
3. Funding allocations based on District objectives
4. Use of program budgeting
5. Use of school-based budgeting
and 6. Decentralized budget development process involving all levels of administration. As noted previously, the Unfinished Compliance Agenda calls for development of specific performance standards by which to measure attainment of the aforementioned system II-3 goals. Unfortunately, (as noted in section I) the District-authored and State-approved performance standards for this area use the same general language as the "Agenda" uses in describing systems. Additionally, each of the performance standards relating to budgeting and financial planning (XIII-B 1., -B 2., and -B 3.) calls for the following: "By November, 1989, needs and requirements for new system defined, system acquired and modifications leading to implementation in place." Unfinished Compliance Agenda, Component XIII, Management and Finance, performance standards, dated October, 1988. This statement merely describes when the new system will be defined. There is no mention of an actual implementation schedule or timeline for an operational system to be in place, or more importantly, by what criteria the outcomes of such a system are to be measured. c. Description of Current Status A number of reports, written policy documents, regulations, procedures, and other documentation were requested of District officials for review and analysis. (The requested documents would constitute, collectively, a baseline description of an effective, operational financial planning and budgeting system for a public school system.) II-4 In addition, a group of school principals, central office administrators, and other selected administrators were interviewed in order to attempt to identify areas of significant achievement and significant problems relating to the stated goals of the Agenda. The following is a description of the current level of achievement of each of the system characteristics identified in Section IIB above: 1. Revenue & Expenditure Projections Documentation of three- or five-year revenue and expenditure projections, with related narrative and analysis was requested. The District provided several documents, including Comprehensive Annual Financial Reports for fiscal years (FY) 1987 and 1988, a "Comparative General Fund Receipts and Expenditures" document for the period 1979 through fiscal year 1990-91, and the FY89-90 Budget Manual of Instructions, that indicate three-year projections are prepared by the District and reviewed and revised periodically. However, the public budget document provides no information regarding such projections, and therefore it II-5 appears that long-range financial planning information impacting on educational programs is not readily available to the public. The "FY88-89 Appropriations and Budgets" document has a series of "four-year" summaries of revenues, expenditures and fund balances. However, these include the current year, two previous years, and the projected budget year. There is no long range financial projection and analysis in the public budget document. The budget procedures include a form for school and other unit administrators to provide a multi-year (3-year) budget analysis reflecting the future impact of the immediate budget year request. This provides a "what if" look at budget requests on a detailed unit by unit basis which can then be summarized systemwide. However, it appears that this analysis is performed only at the lowest detail level by school and other unit administrators and is not synthesized into a systemwide projection using a computerized projection or modeling system. Such a summary-level analysis would reflect such factors as cost increases in existing programs due to inflation and salary increases, known cost increases due to previously approved program expansion, enrollment-driven cost increases or decreases, known savings due to program discontinuance or planned school closings, one-time costs, II-6 and the like. The result of such an analysis is to derive the overall cost of the present level of operations for subsequent fiscal year(s). It can form a "platform" or a base with which to compare proposed changes. Revenues require similar analysis with realistic projections of funding support from local, State, and Federal sources. A study conducted for the Board of Education by the CPA firm of Laventhol & Horwath, entitled, "Financial Management Information System, Assessment of the Existing System and Identification of User Requirements" (August, 1988) identified forecasting/modeling capabilities as one of the six major functional user needs not provided by the current District financial system. In an interview, the District Treasurer stated that the revenue projections performed by his office are very straightforward with few variables. In the Treasurer's opinion, such projections do not require a computerized modeling system. While this might possibly be true of the revenue side of the financial system, the expenditure side is driven by many factors, and it would appear that a computerized forecasting system would be the most efficient method of obtaining timely and accurate information. Conclusion: Projections of the financial impact of expenditure and revenue trends beyond the current year are produced by the Cleveland Public Schools on a manual basis for a three-year planning period and are used by District personnel in the financial planning process. Such projections, however, are not part of a computerized financial modeling system that would provide a systematic approach to long-range financi~l planning. This long-range information is not routinely available to the public in the public budget documents of the District. 2. Staffing Budget Based on Enrollment Projections: The interviews indicated school principals perceive that there is now an equitable allocation of instructional staffing based on enrollments. (2.1) Most principals interviewed referred to enrollment-based allocation factors controlled through the central budget office. However, neither the budget procedures manual nor the public budget document explicitly state the staffing allocation policies, formula or standards that are used in the budget process. (2.1) However, the Science and Music/Fine Arts Divisions' central office administrators indicated their staffing is not based on enrollment (since the advent of school-based management program). II-8 It is of interest to note that in another report, "Report Number One of The Management and Finance Advisory Committee to the Cleveland Public Schools - Informational and Other Needs of Principals, Teachers and Parents Relating to School Based Management," May 16, 1988,p.32, principals criticized these enrollment projections as being inaccurate and resulting in last-minute staffing changes when schools opened each year. It is unclear the extent to which staffing allocations other than school instructional staff are determined on a similar basis since conflicting documentation was received. For example, a central office security administrator responded to the survey questions that security personnel are allocated "by location" (which may or may not address needs) a process that was felt to be fair. (2.2) In the area of administrative staffing allocations, a few principals commented that the allocation is not enrollment based, and that there are disparities between small middle schools and larger elementary schools which are not formula-based. (2.2) Interview with District Safety and Security Division Director, December 6, 1988. II-9 Several principals also stated that schools with differing levels of need have the opportunity to request additional staffing resources and are given consideration based on available funds. The District generates a summary enrollment report on an annual basis. The "Enrollment Projection Report" for 1987-88 consists of one page cover sheet with 14 pages of computer-generated enrollment data summarized by ethnic category and grade level. {2.3) Five years of history and five years of projected data are presented, with percentage calculations by ethnic categories. The report provides no narrative description or analysis of the data, no description of the projection methodology, and no data on the accuracy of projection data in previous years. {2.3) The complete document is raw data for use by technicians. The cover sheet refers to a full detail report consisting of 5000 pages of data. The type of analytic management report referred to above would provide systematic supporting data for the long-range expenditure projections referred to in section 1 above. This does not appear to be done on a systematic basis as part of the budget process. II-10 In short, there is no professional analysis of the information to provide senior management, the School Board, and the general public with useful management information to support policy decision-making. Conclusions: The allocation of instructional staffing resources to schools appears to be based on an enrollment-driven set of standards, although such standards are not explicitly stated in the budget documents. Other staffing allocations appear to be driven by decision factors other than enrollment, which also are not explicitly stated. Long-range use of enrollment data for staffing analysis and projection purposes does not appear to be systematically utilized in the budget process. The goal of having the staffing budget based on enrollment data is currently being met in the area of school instructional staffing, but does not appear to be operational in other staffing areas. 3. Funding Allocations Based on District Objectives: The annual budget process calendar, budget procedures, budget message from the Superintendent and the School Board, and responses to the interview questions, all indicate a reliance upon the Districtwide goals and objectives in establishing budget priorities. II-11 These goals are explicitly stated in the public Appropriations and Budgets document. They are "derived in part from the fourteen components of the Remedial Order ... and particularly, the Final standards for Implementation of the Remedial Orders." (2.4) Copies of the Districtwide goals and objectives document are distributed annually with the budget procedures manual, and both principals and central office administrators responded in the interviews that the documents were actively used in both the development of the budget requests, and in the final decision processes by which budgets were approved, (within the funding limitations in existence at the time.). The school-based management approach which the District has implemented focuses funding allocation decisions around school priorities. This supports the goal of decentralized decision-making which is a major element of the Remedial Orders. The District also has established the District-wide goals and objectives referred to above to provide a policy framework for school-level decisions. However, the public budget document does not provide a synthesis, or summarization, of the school-level budget priorities that demonstrates funding has indeed been allocated to meet the high priority goals and objectives of the District. All of the budget information is displayed by school (2.4) 1988-89 Appropriations and Budgets, Cleveland Public Schools, page iv. II-12 or department and the budget does not identify how budget requests relate to Districtwide programmatic priorities. An example of the lack of readily available financial data to support District goals and objectives is the "Cost-Effectiveness" study relating to reading. (2.5) Reportedly, the most difficult information to obtain in preparing the study was the cost information relating to the various reading programs. (2.6) Reading was one of the key areas addressed by the Remedial Order of the Federal District Court, and improvement of reading skills is stated as one of the District's goals in the annual budget document. However, it was indicated that there was no readily available source to obtain the systemwide reading costs, and research staff had to obtain the information from a variety of sources other than the regular budget and financial reports of the District. As a result, such a programmatic cost would, at best, be difficult to determine. Conclusions: The budget process appears to allow for the allocation of funds based on systemwide goals and priorities, but there is no evidence in the budget document itself that identifies funding allocations for specific priority goals. (2.5) "Cost-Effectiveness, Affirmative Reading Skills Program, 1985-86" Cleveland City School District, prepared by Research and Analysis Department. (2.6) Interview with Chief, Research and Analysis Department, March 20, 1989 II-13 The goals are generally stated in terms of programs, such as testing and tracking, reading, counseling and career guidance, and the like. The budget, on the other hand, is displayed in terms of schools, with little, if any, programmatic financial data. A result is that the programmatic goals of the District as a whole cannot be matched to funding allocations by school and function in the budget document. 4. Use of Program Budgeting: The definitions of program budgeting vary from organization to organization, but one common characteristic is a primary focus on the purpose for which funds are intended, a focus on educational and support service programs (e.g. English, Mathematics, etc.), rather than on "object class" line items (e.g. textbooks, salaries, fuel oil, etc.), or organizational units, or functional categories. The historical requirement for program budgeting was clearly identified by the CPA firm of Ernst & Whinney in its 1981 report commissioned by the Cleveland Board of Education to review the financial/business systems of the District: It has been recognized for several years that the budgeting system and procedures of the District have many deficiencies, including lack of participation by personnel at the "cost center level" (bottom up approach), the absence of timely and detailed reporting for both budget preparation and monitoring, and the lack of budgeting on a programmatic basis. (emphasis added) II-14 However,in the recent (August, 1988} study conducted for the Board of Education by the CPA firm of Laventhol & Horwath, entitled, "Financial Management Information System, Assessment of the Existing System and Identification of User Requirements", there is only one minor reference to program budgeting and reporting. The report includes a summary list of user requirements based on interviews and discussions with District staff. The user requirements for budgeting made reference to cost centers, organizational structures, functional categories, and funds, but not programs. The detail list of requirements, Appendix c, has 25 pages of items listed, and a budget section of 27 items. Twenty-six of these are flagged as "R" priority (required), and one item is flagged as "D" priority (desired}. The one item is item 14 (Pg. 20 of 25), "Provide capability to budget by program and project, at users option." The District has as its primary focus, the school, consistent with school-based management. Within this structure, the budgeting system allows for differentiation between programs within a school, but there is no evidence .Q! a Districtwide focus on programmatic goals, objectives and resources across the spectrum of all grade levels and all curriculum areas. II-15 For example, a Districtwide goal of improvement in the reading levels of students was referred to in the interviews by several principals, but there is no comprehensive overview in the budget documents and process of the systemwide reading program and all of the resources allocated to it. In the FY88-89 Appropriations and Budgets document, reading improvement is referred to as a high priority District goal, yet there is no attempt to identify and measure the resources allocated by the District to reach this goal. An effective program budgeting system would provide this overview, and would provide supporting data to reflect the school-by-school impact and resources for this program. The School Board policy on Budget Goals (3110.la) refers to "Program Functions" as the "action a person takes or the purpose for which a thing exists or is used." It breaks the activities of the District into seven broad "functions": -Instruction -Supporting Services -Operation of Non-Instructional Services -Extracurricular Activities -Facilities Acquisition & Construction Service -Debt Service -Other Uses of Funds II-16 In the appendices to the FY88-89 Appropriations and Budgets document issued by the Cleveland Public Schools, September 27, 1988,, there is a table (C-5) of Uniform School Accounting System (USAS) function categories that have many similarities to program categories. (2. 7) For example, "functions" such as psychological services, guidance, home economics, business and office education, etc. could easily be defined as program categories in a program budgeting system. However, primary academic programs such as reading, mathematics, science, etc. do not appear on the function list, but are lumped together under "regular education". In notable contrast, there are function classifications for "boys' tennis", "girls' gymnastics", "student government", and 83 other extracurricular programs offered by the school system. School Districts provide educational services to students in the form of academic programs, such as reading, , mathematics, science, social science, music, physical education, and the like. Parents, teachers, and students view progress and achievement in the same terms. The (2.7)USAS function categories are established by the State of Ohio Department of Education, not by local districts . II-17 financial and human resources to accomplish all of this in the Cleveland Public Schools are budgeted, allocated, accumulated, analyzed, reported and controlled in terms of funds, schools, components, functions, and objects, but not the primary programs which embody the reasons for the existence of the Cleveland Public Schools. Thus, neither the public education constituencies nor the administrators themselves can readily discern the priorities of the District as reflected in the allocation of resources. Conclusion: A system of program budgeting has not been planned or implemented. It appears not to be a priority objective of the Cleveland Public Schools. 5. Use of School-Based Budgeting: The primary focus of the budgeting system of the District is individual schools. The public budget document, the budget procedures manual, the budget calendar, and supporting budget policy and regulations all emphasize school principals and staff and parents participating in the development of the budget. The interview responses of principals reinforce the perception of this focus. The School-Based Management section (3111.1) of the II-18 School Board policy on Business and Finance clearly provides the principal with the authority and the responsibility for planning and monitoring the school budget. It restricts central administrators from constraining the planning process in any way, other than providing relevant legal requirements. The Superintendent has established several oversight committees which involve principals in discussions and planning efforts in major functional areas of the organization, such as Administration and Organization, Curriculum, Information and Finance, etc. These committees appear to deal with broad policy and regulation issues, and not with the actual budget decision-making that ultimately determines how resources will be allocated to each functional area. In characterizing the level of participation of schools in the budgeting process, the phrase "we work with what they give us" appears closest to the mark. The significant financial decisions are made at the central office level, and schools are allocated a portion of available funds based on enrollments. School principals do not appear to participate in a systematic way in establishing budget priorities other than for the discretionary funds allocated to their own schools. II-19 In some ways, aspects of school-ba&ed budgeting as practiced in Cleveland may have drawbacks. For example, utility costs are budgeted at the school level and principals are responsible for managing such costs, according to interview responses. The more time spent on operational and support service functions, the less time there is for development of effective educational programs in the school. Conclusions: Some goals of school-based budgeting appear to be operational in the District with regard to the planning and implementation of budgets at the school level. Howevert the ability of principals to impact on budget policy decisions which are the basis for per-pupil allocation factors does not appear to be significant. It is difficult to determine what role principals play in the determination of Districtwide funding priorities, since the public budget document does not provide adequate information on funding allocations to priority programs. 6. Decentralized Budget Development There are significant areas of overlap between the goal of decentralized budget development and the goal of school-based budgeting. The budget process, as identified in II-20 both the Budget Manual of Instructions and the Administrative Regulations on budget, emphasizes a decentralized approach, including school staff, parents, students, community members, and others in various stages of the process. Interviews with principals clearly indicate the existence of a decentralized budget planning and decision-making process. Funds allocated to schools on a per-pupil or enrollment basis are budgeted under the direction of the principal with planning support from the groups mentioned above. There is a Budget Review Advisory Committee which advises the Superintendent on the development of the annual budget. (2.8) This group consists of employee group representatives, school board members, parents, students, and administrative staff members. According to the annual budget calendar, this group meets to advise on budget policy recommendations. There does not appear to be significant representation from school principals or classroom teachers on this committee. The budget calendar also describes a process that includes participation by parents in budget training (2.8) Cleveland Board of Education Policy, 3110.lb, "Budget Review Advisory Committee", adopted 7/25/85, revised 6/30/88. II-21 workshops, and active participation by School Community Councils in the development of school budgets. Conclusions: A structure for a decentralized budget development process appears to have been put in place at the school level. However, Districtwide budget decision-making appears to be essentially a central-office responsibility. The District does not appear to have an organizational process to allow substantive participation of school-level staff in major budget decisions. D. System Implementation Planning Efforts: The preceding analysis of the progress the District has made toward accomplishing the goals it has established for itself under the Unfinished Compliance Agenda Management and Finance component relating to financial planning and budgeting indicates the District has partially met its goals in most areas, with the exception of program budgeting. Planning efforts undertaken by the District toward full accomplishment of these goals are identified as follows: 1. Revenue and Expenditure Projections The assessment by the CPA firm of Laventhol and Horwath II-22 states that forecasting and modeling capability was one of six major unmet user needs identified. In its recommendations, the report stipulates implementation of this capability in a new financial management information system as a priority. The District has established a performance standard relating to financial management and budgeting which stipulates a target date of November, 1989 for a new system to be in place with appropriate modifications. Reportedly, the November 1989 date was intended to be a target date for a system to be defined and selected
actual implementation of that system is not likely to occur until July, 1991.(2.9) The above mentioned assessment by Laventhol & Horwath in August of 1988 indicated a July, 1990 date as feasible. Originally, a December 1988 date had been planned by the District in the Five-Year Computer Plan. (2.10) The District's current plans and timelines for implementation of a new financial system, including budgeting and financial (2.9) Interview with Chief, Management, Budget and Systems Department, March 20, 1989. (2.10) Cleveland Board of Education "Five-Year Computer and Data Processing Plan", dated October 8, 1986. (the "Five-Year Computer Plan") II-23 planning, are somewhat unclear. The District Chief of Management, Budget, and Systems described the District's "two-pronged" approach to resolving problems with the current financial system. The first prong is a project to convert the existing financial system, which operates on the old IBM System 3031, to the new IBM System 3090 which was installed in June of 1987. The stated reason for this move is major hardware breakdowns on the old system which cause significant delays in processing financial information and generating reports. In order to accomplish this, the District planned to issue a RFP (Request for Proposals) for a consultant to study the costs and requirements for migrating to the new hardware system and to develop a set of specifications for the planned move. This set of specifications will then be sent out to prospective vendors in the form of a second RFP, and a contractor will then be selected to perform the actual conversion. The Chief of Management, Budget and Systems stated he was hopeful that the conversion could be accomplished within a one-year period of startup. The second prong is a project to implement a new financial system on the IBM System 3090 hardware, to meet the requirements for a fully integrated financial management II-24 and control system as identified in the numerous studies and reports performed by the District in recent years. (2.11) The District plans to issue a RFP to obtain a consultant who will assist the District in developing a set of specifications for a new financial system and prepare a RFP for public bid. This second RFP would seek a contractor to provide all the necessary services and support to install a "turnkey" financial system. The Chief of Management, Budget and systems, as indicated previously, was hopeful that this system would be operational by July of 1991. The current plan of the District, then, is to issue a series of four RFP's with which to obtain expert outside assistance to 1) convert the existing inadequate financial application software from a malfunctioning hardware system to a functioning hardware system, and 2) install a new financial system to replace the current one which does not meet the needs of the District. (2.12) (2.11) Examples of recent studies include: the previously mentioned Laventhol and Horwath Report in August, 1988
the "Application Transfer Study" conducted by IBM in conjunction with District administrators and other staff in the Business Department, August 26, 1988
"Report Number One" and "Report Number Two" of the Management and Finance Advisory Committee to the Cleveland Public Schools, issued on May 16, 1988 and September 15, 1988, respectively. (2.12) Interview with Chief, Management, Budget and Systems, March 20, 1989. II-25 One question immediately surfaces from this scenario: Why does the District not consider placing an organizational priority on the installation of a new financial system, and set a timeline of July, 1990 for implementation, thereby eliminating the need and the costs of conversion of the old system? The District could call upon corporate resources to assist in identifying existing "state-of-the-art" financial packages that would substantially meet the District's needs. In any event, the November, 1989, date specified by the District in its performance standards can only be characterized as one benchmark date in the overall project. 2. Staffing Based on Enrollment As stated earlier, basic teacher staffing allocation factors appear to have been established and appear to be operational. Other staffing factors do not appear to be established or in the process of development. The District should consider publishing a staffing document which outlines the staffing formulas as public information, and provides data on a comparative school-by-school basis that demonstrates the equitable distribution of such staffing. There is no evidence that the District has a long-range staffing plan for all positions which is enrollment based. Such a staffing plan would be a necessary ingredient in II-26 long-range financial planning and budgeting, since a significant portion of any school budget is staffing-related. (The FY 1988-89 Cleveland Appropriations and Budget document shows salaries and fringe benefits comprise 81.7 % of the total general fund operating budget.) 3. Funding Allocations Based on District Objectives The District has focused its annual goals and objectives around the 14 components of the Remedial Order and the Final Standards for Implementation of the Remedial orders, as stated in the annual budget document. There is evidence that District staff, both at the school and central level, rely heavily on the Unfinished Compliance Agenda as a guiding document in program and budget planning. However, the ability of the District to demonstrate that it is, in fact, allocating financial resources to its high priority goals is severely limited by the lack of program budgeting capability. The essential linkage between program budgeting and resource allocation based on District goals and objectives does not appear to have been addressed in a systematic II-27 fashion by the District. Planning efforts to establish such a linkage are not evident in the various studies and needs assessments relating to the financial system of the District. 4. Use of Program Budgeting As stated previously, there is no apparent evidence that a comprehensive program budgeting system is planned or is a priority of the District. It appears that the concept of program budgeting has been considered of secondary importance to school-based budgeting in the District's planning. It should be noted that the two concepts are not inconsistent. Budgeting systems can and should (and do) incorporate both school and program data in ways that maximize the benefit of looking at financial data from both perspectives. Incorporating program account categories within the existing functional account categories should not require a major effort, particularly since many of the existing functional categories do, in fact, reflect extra-curricular and support programs in the District. II-28 5. Use of School-Based Budgeting The District has focused efforts in planning and implementing a school-based budgeting system. It appears to have been substantially successful in that effort. The involvement of school principals and other school staff in District-level budget decision-making is an area that remains to be accomplished. 6. Decentralized Budget Development As in school-based budgeting, the District appears to have substantially met its planning goals in this area. The same exception applies, in that the final budget decision processes do not appear to include representation from school staff. II-29 III. Financial Management and Control A. Introduction Financial management and control systems must provide the tools to enable all levels of management with budgetary and financial responsibility to obtain the necessary financial infornation to perform their duties. In addition to standard accounting systems to codify, process, and accumulate data, the financial information system must provide layered levels of information from the school level up to the School Board level in a manageable, accessible, and appropriately summarized form. This latter requirement is very critical to ensure that the infornation system does not get buried in detail. Different levels of the organization need different levels of financial information. Strategically-designed exception reporting and summary-level analytic reporting are keys to an effective financial information system. Another key element of the effective financial system is the timeliness of infornation. Stale financial data is unusable and unused financial data. A school-based budgeting system that cannot produce timely financial reports to school principals III-1 inhibits rather than facilitates the allocation of resources to schools. B. Agenda System Characteristics Component XIII-B of the Unfinished Compliance Agenda describes a financial system with the following characteristics: 1. Limits spending to available funds. 2. Limits staffing to available funds. 3. Provides useful financial information to decision-makers on a timely basis. It is important to reinforce the generic purpose for all of the system requirements specified in Component XIII of the Agenda document--namely that they, along with the other components, represent ... The remaining systems which the Cleveland Board of Education must implement to be in full compliance with the letter and spirit of all provisions of the Remedial Orders of the Federal District Court. [Unfinished Compliance Agenda, 1/12/87, page 2) In its simplest form, this means that such systems facilitate the equitable allocation and timely delivery of educational services and resources to the student-clients of a III-2 desegregated District. It is therefore important to design and develop financial control systems that are not so time-consuming and bureaucratic that teachers cannot be hired for classrooms and books and paper cannot be delivered to schools when they are needed. c. Analysis of Current Status The District appears to have achieved a significant level of success in developing overall expenditure control, as evidenced by a number of indicators. The Comprehensive Annual Financial Report as of June 30, 1988 and the accompanying Auditor's statement indicate financial control is maintained appropriately, as does the upgrading of the District's bond rating by both Moody's and Standard & Poor in the Fall of 1988. Moody's comments include the following statement "Significant administrative changes, particularly in relation to expenditure control, appear to have succeeded in providing a more stable operating environment." (3.1) The requested documentation provided by the District for this study in the area of financial management and control included a significant volume of School Board policies and administrative regulations which cover the personnel procurement and purchasing functions. It appears that District policy and III-3 regulation development efforts have absorbed a major portion of staff resources allocated to implementation of the Management and Finance section of the Remedial Order. The documentation and interviews indicate that detail transaction-level financial controls exist and are operational, but that some systems are computerized and others are manual. Therefore, the development of summary-level exception reporting must be done through the preparation of off-line analytic reports by staff members in various financial departments. This is consistent with the assessment by Laventhol and Horwath which states "Based on our review of the system and user interviews, we believe the current system is, at best, an accounting and recording vehicle for supporting the basic needs of the Board. It is not designed to accommodate the emerging needs for an integrated financial management system." (3.2) The following is a description and analysis of each of the characteristics identified in Section III.B above. (3.1) Moody's Municipal Credit Report, December 12, 1988, page 2, included in December 15, 1988 transmittal of "Summary Treasurer's Report as of November 30, 1988 11 from Paul Yacobian, Treasurer to Board of Education. (3.2)"Cleveland Board of Education Financial Management Information system, Assessment of the Existing System and Identification of User Requirements", Laventhol & Horwath, Certified Public Accountants, August, 1988, page I-2. III-4 1. Limit Spending to Available Funds The computerized appropriation control system provides for control at the budget level of school or department. Appropriation (budget) financial status reports are produced on a regular basis and distributed to schools. In addition, supporting detail transaction reports on expenditures and encumbrances are distributed. Almost without exception, school principals responding in interviews indicated such reports were useful and fairly accurate. However, all principals and central office administrators, in response to the question, "Do you know right now how much you have left in each of your accounts?" and "How do you know?", responded that they knew based on manual or off-line microcomputer-based records maintained in their own offices by themselves or clerical staff. In other words, prudent school administrators in Cleveland maintain a separate record, keeping track of requisitions like a checkbook, and balance these against financial reports like a bank statement. This is a common problem for large school systems that is difficult to resolve. The accounting system, like any document flow system, has a number of "float factors" that require separate record-keeping III-5 and reconciliation and impact on accurate reporting. The primary one of these is created by the purchasing cycle, where the time period from requisition to purchase order can be significant, and there is no system for pre-obligating estimated requisition amounts. Administrators must therefore keep track of requisitions they send to purchasing until such time as they receive confirmation through the financial system that an order has been issued and funds have been set aside through a purchase order. Signature authority over purchasing is required by regulation (3132) at the school level and at the central office level by the Chief of the Business Department. In addition, all requisitions between $3500 and $6000 must be approved by a senior administrator, either the Superintendent, Deputy Superintendent, or Treasurer. Requisitions in excess of $6000 require approval by a Business Affairs Committee, the Director of the Minority Business Enterprise Program, the Director of Affirmative Action, and the School Board. All purchase orders must have funding certified by the Treasurer prior to issuance of orders to vendors. Also, the Office of the Financial Administrator screens all requisitions for errors and maintains III-6 quality control item counts on processed requisitions. (3.3) It appears that detail transactions are generally well-controlled from an appropriation standpoint. However, the lack of a cost projection/forecasting capability in the existing system means that summary level control must be maintained by extracting data from the financial reporting system and maintaining manual or microcomputer-based controls as part of a non-integrated financial system. The existence of a short-term expenditure and revenue projection report, which effectively produces cash-flow forecasts on a systematic monthly basis (or more frequently if necessary), would demonstrate financial control overview. For example, the annual budget for utilities might not be overexpended in January, but the rate of expenditure might be such that the budget will be used up by March. The basic budget accounting system will not identify this probability, since a monthly projection of future expenditures at variable rates is required, but is not available in the system. The same could be said for other major expenditure categories such as transportation, employee benefits, overtime, and the like. (3.3) The "Weekly Report" from the Financial Administrator to the Superintendent of Schools includes a detailed analysis by cluster of requisitions reviewed during the preceding week, with follow-up responses on discrepancies. (3/10/89, 122th Weekly Report} III-7 Conclusions - Control over expenditures at the detail level is maintained in a systematic fashion utilizing the capabilities of the computerized financial system, and is supported by appropriate regulations and procedures. However, overall financial cont=ol does not appear to be maintained in a similar systematized fashion but must be supported using analytic reporting and controls developed manually. An integrated financial management system including both accounting and control capabilities at all levels of the organization does not exist in the Cleveland District at the present time. 2. Limit Staffing to Available Funds Although staffing cost control is part of the overall financial control system described in the analysis above, there are unique requirements for a system of personnel controls that justify separate discussion. From the standpoint of pure fiscal control, establishment and maintenance of a system of current controls over the filling of positions is the single most important requirement to ensure solvency. To demonstrate the critical requirement for such control, salaries and related fringe benefits comprise 81.7% of the Fiscal Year 1988-89 general fund operating budget. This percentage has increased from 76.7% in Fiscal Year 1984-85. The budget document provides data on budgeted positions for III-8 schools and for departments, but does not provide a systemwide summary of positions, with comparative data from prior years. The District does net appear to have a computerized position control system that contains information relative to all authorized, budgeted and currently funded positions in the District. Such a system would be used to control the filling of positions, support the operations of the personnel department of the District, provide senior management with summary level status reports on the status of the position budget, and generally eliminate significant manual record keeping which takes place at the present time. The District provided various personnel and staffing reports (see Attachment A) which listed current personnel on the payroll or listed personnel transactions, such as the "Periodic Status Report - Personnel Report". (3.4) There also is a computer report entitled "Summary of Employees - Position by Fund" which was provided by the District (Program run BJ403C, dated 12/23/88). However, all of these reports list only the actual staff in various job code categories and have no information regarding the position budget. For example, one might make a determination as to what level of vacancies the (3.4) "Periodic Status Report - Personnel Report for November, 1988", Cleveland Public Schools, January 2, 1989. III-9 District is carrying over a period of time. Vacancy rates are one of the key factors in making financial projections over the short term. The process for filling a vacancy as described in administrative regulations on "Recruitment and Selection" (No. 4112.1), refers to notices of vacancies for certificated employee positions. The "Recruitment and Selection" regulation (No. 4212.1} for classified employees refers to employee request forms. In neither regulation provided by the District is there a description of the budget authorization process that certifies the existence and current funding of a vacant budgeted position, nor does the regulation require a signature authorization at the senior administrative level. In practice, the Financial Administrator stated that he signs off on all Employee Request Forms ("ERF's"), after sign-off by the department head, personnel, and budget staff. (3.5) Detailed funding information is required on the form prior to sign-off. According to the Chief, Management, Budget, and Systems, the funding information verified in the Budget Office is a combination of budget, payroll, and position data which is verified manually. (3. 6) (3.5) Interview with Financial Administrator, March 20, 1989. (3.6) Interview with Chief, Management, Budget and Systems, March 20 1989 III-10 This is in sharp contrast to the purchasing regulations where senior administrative sign-off (Superintendent, Deputy Superintendent, or Treasurer) is required on requisitions between $3500 and $6000. (3.7) In other words, a decision to proceed with a $3500-$6000 expenditure requires a higher level of sign-off than does a decision to proceed with a possible $30,000-$40,000 hiring process. The regulations on purchasing require an absolute funding verification by the chief fiscal officer of the organization (the Treasurer) prior to issuance of a purchase order. If the regulations on the filling of personnel vacancies require a similar level of authorization, this is not made clear in the documents provided by the District. Actual appointment of individuals to positions must be approved by the School Board. The budget process does not appear to provide a vehicle for analysis of staffing alternatives and options. The staffing data presented in the budget document is stated in terms of numbers of positions in each school. There is no data presented in the public budget document which provides comparative teacher load factors, or similar data that would be useful in developing (3.7) Cleveland Public Schools, Administrative Regulation 3132, "Purchasing", adopted November 20, 1984 III-11 staffing reduction or reallocation alternatives as a standard process. (3.8) Correspondingly, there is no information presented in the budget in a clear, readable, form that demonstrates the equitable allocation of staffing resources across the District. At the time of this study, the District was planning the implementation of a new ISI Payroll/Personnel system, originally scheduled for live operation by January 1, 1989. The timeline has since been changed to a July, 1989 implementation date. According to staff in the Management Information and Evaluation systems office, much of the Personnel subsystem software has been installed and is operational on the new IBM 3090 hardware, and the Payroll subsystem is on target for July 1, 1989 implementation. The interface between this system and budget position control awaits the specification, selection, and implementation of the budgeting and financial system, a step which appears to be at least two years away according to District officials. (see Section II, pages II-21-23) ------------------ (3.8) The Chief, Management, Budget, and Systems, stated in a 3/20/89 interview that the Personnel Division has staffing information, and that there is no analysis of class size in the budget process. He indicated that there was "no way we could know class size detail without a personnel system". III-12 3. Conclusions - The Cleveland School District has a variety of policy, regulatory, and procedural requirements that are designed to ensure that competent and qualified personnel are hired for positions. It does not have a computerized, integrated, personnel/payroll/position-control system to ensure that all staff on the payroll are in budgeted slots and relies instead on manual verification for this purpose. Appropriate management level position control reports cannot be produced from existing computer applications. Provide Useful Financial Information to Decision-Makers on a Timely Basis It is apparent from on-site interviews, District-supplied documentation, and other assessments of the financial system, that the existing computerized financial system is a basic accounting system that provides the required accounting reports to comply with State regulations, but does not provide management at various levels with timely financial information in a form that is directly useful for planning, budgeting and managing the District. A common thread throughout the organization is the need to manually manipulate information obtained from various sources, including the financial system. Management reporting flexibility is not one of the strong points of the existing system. III-13 The assessment report by Laventhol and Horwath (3.9) is a useful document to refer to since it is recent, was commissioned by the District, documents many of the system deficiencies relating to use of information, and was based on extensive interviews with District staff, both at the school building and central office level. The following summarizes the major weaknesses of the current system as identified in that report (Executive Summary, pages I-3,-4): The current system is highly batch oriented, with centralized data entry and paper flow systems that delay transaction postings. There also is a significant month-end closeout process which delays processing of the next month transactions. Both of these factors impede timely distribution of financial data. The system does not have on-line access to data for users at the school level, resulting in principals "waiting for the piintouts" or calling financial staff or school-based management office staff for information. (3.9) "Cleveland Board of Education Financial Management Information system, Assessment of the Existing System and Identification of User Requirements", Laventhol & Horwath, Certified Public Accountants, August, 1988 III-14 - Micro-budgeting is required at a highly detailed level to meet information requirements of the central office, when budgeting at a higher summary level would satisfy school user needs. (example - detail budgeting of employee benefits for each staff position, rather than budgeting a benefits "pool" and letting central office accountants distribute for general ledger accounting purposes). - Administrators have difficulty identifying personnel costs charged to school and department budgets due to lack of payroll/personnel interface. - There is difficulty in reconciliation of computer-generated reports to manual or other computer reports maintained at school level, resulting in "checkbook balancing" process that wastes time. In addition to these operating level information problems, there is the problem of the lack of useful summary level data to support systemwide decision-making and financial analysis. There appears to be no capability to download data from the financial system to microcomputer databases to take advantage of the many spreadsheet, modeling, and graphic analysis software packages III-15 D. readily available in the marketplace. Graphic displays of financial performance data is a tool used commonly in business to provide a much clearer picture of reality than merely charts of numbers. Conclusions: The financial system is a basic school accounting system that generates financial data to comply with State accounting requirements. The computer-based financial syste does not provide adequate overall financial control reporting and extensive manual analysis is required to generate such reports. Management level financial reporting is inflexible and does not take advantage of current technology. System Implementation Planning Efforts The need for planning efforts toward implementation of an effective financial management information system has been known since 1978, when the Remedial Order was issued and fiscal management was identified as one of the major problem areas of the District. In 1985, the District requested proposals from vendors for supplying both hardware and application software to the District. An extensive analysis of the proposals, including detailed criteria relating to the financial system requirements, was performed with the assistance of the Center for Corporate III-16 Involvement in the Cleveland Public Schools. (3.10) The solicitation of these proposals was based in part on an "EDP Strategic Plan" developed for the District in 1984 by the public accounting firm of Coopers & Lybrand. (3.11) That plan, submitted to the then Superintendent, laid out a specific timetable for implementation of a number of improvements in the EDP (Electronic Data Processing) area, including implementation of new financial system software, and the prioritization of the Payroll/Personnel system for implementation by December of 1984. Reportedly, no significant action was taken by the District on either the Coopers & Lybrand study or the results of the hardware and software proposal review.(3.12) In October of 1987, the "Five-Year Computer Center and Data Processing Plan" report was transmitted from the Superintendent to the Board of Education. The report describes a plan to upgrade computer {3.10) Letter from Superintendent of Schools Ronald Boyd to Jerry Jarrett, Chairman of Center for Corporate Involvement in the Cleveland Public Schools, dated March 3, 1986, transmitting package of materials relating to task force review of computer hardware and software proposals. (3.11) "EDP Strategic Plan for the Cleveland Public Schools", Coopers & Lybrand, May, 1984. (3.12) Interview with Financial Administrator, March 20, 1989 (who stated he was directly involved with District EDP planning and proposal review process in 1984.) III-17 and software to enable upgrading of the financial management and information systems. The report describes plans for procurement of hardware, system software, computer staffing, and a variety of technical support services, but contains only a broad and generally vague description of actual applications to be implemented, with virtually no implementation plan other than a timeline showing all proposed applications in the financial management area being completed by December 1988. The District did proceed to implement the hardware procurement and implementation recommendations of that report, but did not proceed with the selection of financial system software. Based on the District's own plans to issue a series of Requests For Proposals (RFP's) for eventual implementation of a new financial system, it appears that the earliest a new financial system will be operational is July 1991. (see discussion in Section II on Financial Planning and Budgeting, pages II-22-24). The highest priority financial application, a "stand-alone" integrated payroll/personnel package, was scheduled for implementation in January 1989. The latest project timeline is July 1989. This system is being implemented independent of the remaining requirements for a comprehensive financial system. Once the overall financial system is in place, the District will III-18 need to integrate the Payroll/Personnel package with the financial system. During the period that Cleveland has been struggling with the problem of an inadequate financial management system, a number of school districts, municipalities, and other government agencies across the country have been planning and implementing new financial management information systems, and a wide variety of integrated packages have been developed and marketed with cooperative efforts between software firms and major computer hardware vendor support. A Request for Proposals (RFP) for hardware, software, technical support, and proven operational application software has become a common method of implementing required systems, with the vendor having total responsibility for installation and turning over operational systems to the customer ("turnkey" systems). Cleveland did not take this approach in the past. The District decided to purchase a hardware system, and deal with the development of financial information system_s afterward (with the exception of the payroll/personnel package). This does not appear to have resulted in any substantial progress in meeting the objectives and timelines set by the District in its own planning documents. III-19 Information was requested from the District on the status of the Laventhol & Horwath recommendations relating to implementation of a new financial management information system. The recommendations support requesting proposals for system and application development from outside vendors and not developing a new system in-house or modifying the existing system. The District has apparently decided to initiate the RFP process for hardware and software which is described in Section II-D, but had not issued any proposal request documents as of the end of March, 1989. A typical planning process for implementation of a new financial information system assigns a proj~ct team with leadership to define, recommend, and direct the implementation effort. A project Gannt Chart or similar timeline planning tool, and regular progress reporting to top management are necessary components. The District did not provide requested documentation to demonstrate that such a systematic planning process is in place. III-20 IV. Management Infornation Systems A. Introduction The Unfinished Compliance Agenda calls for a "System of timely, accurate, and practical management information containing data which is used by the District to improve planning and decision-making." (4.1) When individuals both inside and outside the organization refer to management information, they very often are referring to budget and financial information. However, the scope of management information systems is much broader and should address all elements of the organization in defining information needs. (4.1) Unfinished Compliance Agenda, January 9, 1987, Management and Finance Component XIII-E, page XIII-5. IV-1 One of the hazards of attempting to define the information needs of an organization is the inclination to overemphasize the requirement for a comprehensive system and attempt to identify all of the needs of all segments of the organization before proceeding to build the system. This generally results in nothing being accomplished. It is imperative to focus on the high priority information needs which support the primary purposes of the organization, and to design a system of gathering, validating, storing, summarizing, analyzing, and providing access to data to those who need it. In many organizations, there is a wealth of information being gathered and used by various elements of the organization which is not being shared with other elements of the organization. A key to success is to identify those existing sources, build them into computer-based systems, and make use of networking and database technology to disseminate the information to those users throughout the organization who need it. IV-2 B. Agenda System Characteristics The entire Unfinished Compliance Agenda is concerned with information in its various forms and the effective use of information to improve the delivery of services to students. The specific systems outlined in Section XIII-E of the Agenda describe the process, characteristics, and support systems needed to provide an effective information system, rather than the substance of the information system itself. The Performance Standards document simply reiterates these system descriptions and provides no additional information or definition of actual information needs, or major categories of needs. For example, financial information is obviously a major category of information, and personnel information is another major category. There are a wide range of information needs in the area of student performance, including test scores, retention rates, dropout rates, employment followup statistics, etc. that might form another major grouping. In the absence of substantive standards, the performance standards set out process steps: 1. Conduct a needs assessment with administrative, staff, parent, and community participation. IV-3 2. Define needs and requirements for new system. 3. Acquire and modify system leading to implementation by November, 1989. The District and State have taken the approach of stating a performance standard in terms of a vague set of activities leading to a generally undefined system. (As previously noted, the performance standards for Management and Finance were drafted by the District and approved by the State.) There is nothing in the performance standard for management information systems that can be measured to demonstrate accomplishment of the District's self-defined goal of a system of timely, accurate and practical management information containing data which is used to improve planning and decision-making. Conducting a needs assessment and defining the needs and requirements for a new system merely outlines a set of tasks to be conducted. The Court Order of August 14, 1987, approving the Agenda, has language that bears repeating: Compliance with the Remedial Orders will not be measured simply by completion of tasks outlined in the document, 'but by fulfillment of the underlying duties embodied in the Remedial Orders and the Final Standards for implementation of the Remedial Orders ... (Order of August 14, 1987, quoting Order of September 26, 1983) IV-4 c. Description of Current Status The District provided several documents relating to information systems, primarily in the area of planning documents and implementation timelines to the extent they existed. The primary source document received was the "Five Year Computer Center and Data Processing Plan" report submitted by the Superintendent to the Board of Education on October 8, 1986. An earlier document which also provides useful information is the Coopers & Lybrand report of May 3, 1984, entitled "EDP Strategic Plan for the Cleveland Public Schools". The Coopers & Lybrand study was a comprehensive planning document developed for the District in cooperation with the Center for Corporate Involvement in the Cleveland Public Schools. It provided a historical perspective on problems leading to the study, a detailed needs assessment, specific recommendations, and a strategic plan for implementation. In 1985 and 1986, the District proceeded to develop a set of hardware, system software, and application selection criteria and requested and received proposals from vendors for computer hardware and software. A task force was initiated to evaluate the proposals, with the assistance of the Corporate Center. It appears that no implementation actions resulted from this process. IV-5 The Five-Year Computer Plan submitted in October of 1986 requested approval of a funding plan over five years of approximately $28.8 million, which was $12.0 million in excess of the then current spending levels. The plan proposed the purchase of a new IBM 3090 mainframe computer system with installation support from the vendor, increasing computer staff from 67 to 87 to support conversion and ongoing development (with gradual reduction over seven years to 57), purchase of one major piece of application software, a payroll/personnel system, and a commitment for future funding for staffing, hardware, software, consultants and training needed to carry out the plan. Interviews with District staff in the Management Information and Evaluation systems Department ("MIES") indicate that the District has made significant progress in developing and implementing applications relating to student information systems. (4.2) A "CBOE Information system" summary chart was provided which outlines the status of major applications (Appendix C) . (4.2) The term "application" is used to refer to a logical grouping of information in the form of documents, reports and processing activities that are closely interrelated in a computerized information system. For example, a student attendance application might collect various elements of (Continued on the following page) IV-6 Nineteen application systems are listed, which may be broken down as follows: ------Number of Applications------------ Student Info Financial Other Status of Development Applications Applications Applications Application Implemented: 8 o O Applic.in Development: 5 1 0 System Under study: _l _1. _1. Total Systems: 14 3 2 A number of the student information applications using Sierra software packages are operational on a Digital Vax8550 computer system, with online access from schools (except for elementary schools, which are scheduled for September, 1989) using Digital Equipment Corporation Microvax microcomputer systems. The only student information application on the new IBM 3090 is a Citywide Test Scoring and Reporting appli~ation. (4.2) con't: information on student attendance, absences, tardiness, , etc., and generate reports to principals, counselors, teachers, parents, and others. A student report card application might collect data for report cards, including grades, comments, and the like
calculate class ranks, grade-point averages, or other averages
and produce reports cards, honor roll lists, transcripts, exception reports, and the like. Both of these applications would be considered to be components of a student information system which might include a wide range of other data, including student demographic data, standardized test scores, etc. IV-7 The question of why the District had been relatively successful implementing student information aplications and has shown little progress in implementing financial applications was asked of District staff during March 20, 1989 interviews. The response was that the student information applications were a high priority and were an "easy first target" while the financial applications are more complex (and thus take more time). (4.3) Interviews with principals disclosed a fairly high level of satisfaction with the basic student information systems, including attendance, grade reporting, scheduling, and the like. The major objection was the lack of on-line access to the information (elementary schools), and the need for an operational student transcript system. The transcript system is now substantially completed, and on-line access, which is operational for secondary schools, is scheduled for implementation for elementary schools in September, 1989. The initial financial application to be implemented is the ISI Payroll/Personnel package. Implementation was originally scheduled for December 1987 according to the Five-Year Plan (4.3) Interview with Chief, Management, Budget, and Systems, March 20, 1989 IV-8 timeline. The schedule was revised to January 1989, and has been revised again to July 1989. It now appears to be on target, as indicated in Section III. The remaining financial system applications still reside on the old IBM3031 system. These were all scheduled for implementation by December, 1988 according to the Five-Year Plan. ~s stated in Section III, above, it is now estimated that July of 1991 is a probable implementation date. One of the characteristics of information systems specified in the Agenda is, "Timely provision of useable management information to planners and decision-makers, with analyses where appropriate ... " (emphasis added). A previously-noted example of the lack of, and need for such analysis can be found in the "Periodic Status Report - Enrollment Projections". This report serves a major Districtwide planning information need, since every program and service in the District is enrollment-driven. As previously described, this report consists of a brief descriptive cover page, 14 pages of summary enrollment data, and a reference, to those who are interested, that there is a 5000 page detail report in the OSMCR office. This report contains no adequate, analytic narrative on enrollment trends, significant changes, impact of changes, or the like. This report is long on data but short on analysis. Its utility to decision makers is limited thereby. IV-9 Another report which provides a great deal of data, but also includes a fair amount of useful description and comparative data, is the "Building Profile" document. (4.4) This document provides a range of individual school statistics and performance indicators, such as test data, staffing, attendance rates (for staff and students), failure rates, suspension and dropout data, and progress toward District goals. A notable shortcoming is the lack of any financial or budget data whatsoever. Conclusion: The District has made progress in the development and implementation of useful student information systems. On the other hand, there has been little progress demonstrated in implementing effective financial systems. The implementation of new information systems in the area of financial management does not appear to be well-planned or well-directed. It is unclear whether this is related to problems in the offices having responsibilities for information systems development or offices having responsibility for financial planning and operations. Based on positive feedback on the application development in the area of student information, one could conclude the problem is in the latter area. (4.4) 111987-88 Building Profile", prepared by Department of Research and Analysis, Cleveland Public Schools. IV-10 D. There does not appear to be an effective approach to project management in the implementation of financial systems. System Implementation Planning Efforts The District's planning efforts for management information systems have, at best, a spotty history. The experience reflected in the 1984 Coopers & Lybrand "EDP Strategic Plan" and subsequent inaction indicates the historical lack of a coordinated planning and implementation efforts. The Five-Year Computer Plan describes a number of resources requested, but has significant shortcomings as a plan. The document provided little analysis of the problems and recommended solutions, only a general timeline with no implementation plan, no discussion of alternatives considered, and no criteria upon which the recommendation was based. The Plan basically presents a list of requested actions, including funding authorizations, by the Board of Education, with a number of pages of detailed cost data, and little, if any, overview (The Coopers & Lybrand study, by comparison, is a decidedly more useful planning tool.). A more recent plan that has many of the elements that are missing from the Five-Year Computer Plan is the "Application Transfer Study~ A Management Review of Business Department Operations", dated May, 1988 (also, the "Application Transfer IV-11 Study"). This study and resulting plan was a combined effort of the IBM consulting staff with assistance from District Business Department administrators and staff. It is a well-organized and useful document. It includes a detailed needs assessment based on extensive interviews and study group meetings within the Business Department, recommends solutions to the identified problems, reviews priorities for implementation of subsystems within the overall system needs, esti.Jllates costs of implementation, provides an implementation plan and schedule, and provides a clear and well-organized executive summary to assist decision-making. A Board of Overseers for MIES (Management Information and Evaluation systems) was established in May of 1988 to provide oversight on District priorities for management information systems development, equipment acquisition, and resource utilization. (4.5) During interviews with MIES and other District administrators, it was acknowledged that the Board of Overseers had become bogged down in dealing with relatively minor equipment acquisition issues and programming revision (4.5) Board of Education Policy 3251a, adopted April 14, 1983, amended September 8, 1988. IV-12 requests. More recently, the Board of Overseers has reportedly broadened its view of its role to deal with Districtwide priority issues. ( 4. 6) The District has employed consultants to perform a variety of planning and study projects, primarily in technical support areas. (4.7) The District also has a Management and Finance Advisory Committee consisting of representatives from the Greater Cleveland Roundtable and the Cleveland School Buqget Coalition, who are providing an advisory and oversight role in assessing needs, particularly in the financial management area. During the on-site interviews with District administrators, the question was raised in several discussions as to whether there was a single document that summarized the District's plans for development of computer-based information systems, both short-term and long-term. The only documents referred to were the Five-Year Computer Plan described above, and the "CBOE Information Systems" chart. The Plan document, as stated, has virtually no information on implementation schedules, and the few dates it contains are long since past (4.6) Group Interview with MIES administrators and Chief, Management, Budget, and Systems, March 20, 1989. (4.7) A recent example is the "Proposal Plan for the Implementation of a District Wide Backbone communications Network" prepared by Software Support Group of Cleveland in October, 1988. IV-13 due. The chart is just a short listing document with no overview narrative. A very detailed MIES Division project management task/resource/timeline list was provided for the Payroll/Personnel project, but the information was at the level of project leader and staff task schedules, rather than a useful summary for management. The District also provided a computerized project management document in the form of a modified "Critical Path Method" (CPM) -chart for the "Financial System Acquisition and Implementation Milestones". This document was identified (4.6) as the "former financial system timeline" and reflects a timeline from September 1988 (the date of acceptance by the Board of Education of the Laventhol and Horwath Study Recommendations), through February 1990 (Target date to develop training instructions). Both of these documents suggest that the District has or can aquire by outside contract the capability in the area of technical planning at the project detail level, but has had difficulty with administering the overall planning function in the area of Management and Finance. It appears that planning and implementation capabilities have not been institutionalized in this area. Conclusions: The District has the capability through outside assistance to develop well-organized and comprehensive plans for implementation of information systems, as evidenced in the IV-14 Application Transfer Study from the Business Department. However, this capability seemingly has not been brought to bear in other areas. The District's capability may very well be dependent upon individuals' talents, rather than an institutional planning capability. There appears to be an unmet need within the District for quality control standards, and adherence thereto, in the planning function, especially for management information systems. IV-15 v. Capital Planning & Budgeting A. Introduction The Remedial Order and other documentation, including various reports from the Special Master appointed by the Court, identified capital planning and budgeting as one of the areas of significant financial mismanagement leading to the financial crisis faced by the Cleveland School District in the 1970's. (5.1) Building and renovating schools without taking into account enrollment declines and enrollment population shifts, failing to identify and utilize existing facility resources before initiating construction programs, absence of any capital planning process, failure to maintain existing facilities, and a variety of similar problems were cited as contributing to the lack of financial control in the District. From 1978 to 1985, management of enrollment and student assignment, combined with excess school capacity and declining school enrollments, have contributed to a reduction of the number of school facilities from 178 to 128. In August of 1987, (5.1) The Capital Planning and Budgeting process is usually concerned with the long-term assets of a District and major one-time expenditures that may require long-term financing through bond issues. Funding for new schools, major building renovations, replacement of major fixed equipment in buildings such as boilers and heating systems, roof replacements, and major building repairs are typically considered in such a process. Other major one-time expenditures may also be considered, such as bus fleet replacement, computer mainframe purchases, major systemwide equipment replacement or upgrades, and the like. V-1 voters of Cleveland authorized a bond issue in the amount of $60 million for capital improvements relating to schools. B. Agenda System Characteristics The Unfinished Compliance Agenda (Section XIII-D) identifies the need for a system of physical plant and asset controls for managing, maintaining, repairing and conserving the physical assets of the District. This general goal includes elements of ongoing facilities maintenance and repair as well as major capital projects. Those agenda system characteristics which relate to capital planning and budgeting may be summarized as follows: 1. Prioritization of major-expense building repairs
2. Programs for meeting all State Minimum Standards
3. Asset inventory and real estate control systems
and 4. Follow-on preventive maintenance programs. Although preventive maintenance is more commonly a component of an operating, rather than a capital, facilities maintenance budget, it is none the less important to address future major V-2 preventive maintenance requirements in any capital improvements plan, and to standardize building systems where feasible to provide for efficient follow-on maintenance. c. Description of current Status During the period 1978-1985, (Remedial Order issued in 1978) little was accomplished with respect to long-range planning for facilities. In response to Court Orders, a facilities utilization plan was developed by the District an& approved by the Court in 1985. The purpose of the Facilities Utilization Plan, and its annual update, is to ensure the use of District facilities in an equitable manner consistent with educational program needs. (5.2) The efforts to obtain public support for a bond . issue to improve and renovate school facilities were successful in August of 1987, and a $60 million bond issue was authorized. One of the supporting documents prepared by the District in that effort was a detailed computer-based list of major (and some minor) repair needs for all schools in the District. A Superintendent's Advisory Committee on Capital (5.2) "Cleveland Board Of Education Unfinished Compliance Agenda", Component I-B, 1/12/87 V-3 Improvements was formed in August of 1987 to develop a plan for capital improvements ("Superintendent's Plan"). This plan was submitted to the Board of Education in February of 1988 for approval. One of the components of the Superintendent's Plan was to conduct a Districtwide survey of facilities conditions prior to determination of priorities and beginning work. The plan also called for an Architect and a Contruction Manager to be hired, independent of each other, to provide appropriate control over projects. Between February and April of 1988, a series of communications regarding capital improvements took place between the Board of Education and the Building Trades Division of the Business Department. These communications bypassed the normal administrative channels of the District. What evolved from those comunications, without the approval of the Superintendent, was a separate 111988 Capital Improvements Plan" presented by the Business Department, Building Trades Division to the Board of Education Finance Committee and to the Board of Education Business Affairs Committee. This document ultimately became a major component of the Capital Improvements Plan adopted by the Board of Education in May of 1988 (the "Board's Plan"). One significant difference between the two capital improvements plans was the proposal in the Board's Plan to V-4 bypass much of the front-end survey of conditions and hire up to 56 tradespersons immediately to begin repair work in projects identified by the Building Trades Division. It is of interest to note that the Board's Plan is organized totally by tradesperson categories. Funding requirements are presented in terms of "Electricians" or "Carpenters" or "Sheet Metal Workers", with re~ated materials costs in lump sum amounts for each year of the four year plan. School projects are identified on a supporting detail list, but are again organized by tradesperson. The 1985 Facilities Utilization Plan focuses on schools and school programs required to provide educational services, while the Board's Plan focuses on the employees providing the services. The Board' s Plan centralizes responsibility for planning, coordinating, and managing the capital improvements plan in the position of Architect of the Board, who would report to the Chief of the Business Department. The Architect is to be selected based on recommendations submitted by an advisory committee to the Board. Funding for this office is authorized not to exceed $1 million over four years (not specified whether this is from capital funds or operating funds). Other components of the Board's Plan include the following
1. Allocation of $15.9 million of the bond issue to projects to be performed by the Building Trades Division V-5 of the Business Department, in order to initiate activities immediateJ.y that are suitable for staff of that division to perform. 2. Architect to utilize Requests For Proposals ("RFP's) to solicit professional architect and engineer assistance in preparing professional technical studies and developing specifications. All RFP's to be approved by the Business Committee of the Board. (5.3) 3. All projects to be bid according to applicable state law under competitive bid system. 4. Projects to be performed by contractors under the direction of either the consulting engineer/architect or Building Trades Division personnel, where appropriate, coordinated by the Architect of the Board. 5. The Architect will monitor all expenditures under the plan. 6. The Chief of the Business Department, the Architect, and the Director of the Building Trades Division are to (5.3) As of 1989, the Cleveland Board of Education no longer has a Business Committee. V-6 report twice monthly to the Business and Advisory Committees on project progress and financial status. The plan adopted by the Board of Education is conspicuously missing any reference to the Superintendent or the normal organizational chain of command of the District. The Chief Executive Officer of the School District who is responsible for educational planning and implementation seemingly was excluded, by Board resolution, from authority over decisions relating to the educational facilities improvements to support those educational programs. (5.4) An aspect of the foregoing Board Plan that is potentially troublesome is the separation of implementation responsibility for some projects under the Building Trades Division and others under the Architect. The Plan does not place the Director of the Building Trades Division under the Architect organizationally, yet the Architect is designated as the one person responsible for management of the entire Plan. If there are disputes over whether projects should be bid out or performed in house, this lack of organizational clarity could delay projects. (5.4) Cleveland Board of Education resolutions, April 14, 1988 and May 5, 1988. A subsequent resolution directed the Superintendent to hire the tradesmen called for in the Board's Plan. V-7 Although the Superintendent has been, in effect, excluded from the decision process, there is still active involvement by staff assigned by the Superintendent to monitor progress on capital improvements. The Financial Administrator, in his role as Special Assistant to the Superintendent, monitors the costs on capital projects and reports weekly to the Superintendent on the status of projects. (5.5) As of the time of this study, the Board had still not hired an Architect to function as Architect of the Board. Three architectural firms have been hired for specific projects, but there is no lead responsibility. Conclusions: The recent progress resulting in funding for capital improvements and adoption of a management plan for overseeing their implementation are necessary steps toward establishing a system as described in the Agenda. However, the absence of the lead Architect and the separation of responsibility for projects between Building Trades and project architects raises concerns about effective management of the (5.5) The 122nd Weekly Report for the Week Ending March 10, 1988 from the Financial Administrator to the Superintendent includes a rather detailed status report on capital projects which indicates that substantial progress has been made on several roofing and other projects. V-8 Board's Plan. Specific project status reporting, particularly on the $15.9 million authorized for immediate use, is critical to monitor performance. The Plan appears to exclude the Superintendent, the administrator with primary responsibility for District governance, from any direct role. D. System Implementation Planning Efforts: The progress described in Section C above is essentially in the area of planning. The next phase of the planning efforts should concentrate on specific project-by-project implementation plans, including engineering condition reports, specification development, contract bidding timelines, contractor selection, and projected construction startup and completion. Parallel to the above efforts, project staff should be assigned to pursue other funding sources that may be available, such as federal energy grants for both energy audits and energy conservation measures. Roofing, boiler, window, and HVAC (heating, ventilation, air-conditioning) projects may all qualify for funding. Active coordination of these planning efforts with the Treasurer should be maintained in order to coordinate the need for funds with the bonding process managed through that office. V-9 This will assure maximum utilization of funds (within the restrictions of relevant arbitrage regulations). A missing element in the planning process is the participation of school-level educational and adminisitrative staff. The involvement of principals, school staff, and parents in school-specific projects often generates significant support for projects that otherwise might be viewed as nuisances if undertaken during the school year. Participation at this level can identify problems not known at the central office level, and offer logistical solutions or alternatives that can facilitate work being performed during the school year. Also, people tend to develop a sense of ownership through active participation, and seek positive solutions to problems rather than build roadblocks. The participation of School Community Councils would be a valuable contribution in that regard. In the interest of cost effectiveness, the A~chitect and Director of Building Trades should collaborate on standardizing as many building elements as possible, with assistance from engineers and vendors. For example, standardization of roofing, including insulation requirements and construction technologies, can result in significant savings and provide a consistent set of standards to enforce when inspecting work in progress. V-10 Planning should include a very careful design of the process for inspection of work in progress. In addition to the standard state and municipal building inspection and certification requirements, the District should consider the need for professional engineering project oversight. (5.6) (5.6) In considering such engineering oversight, the District should clearly stipulate the need for competent staffing, since engineering and architectural firms often assign junior, inexperienced persons to such duties. v-11 CLEVELAND DOCUMENT LISTING: Attachment A: The following is a list of documents provided by the School District and osMCR to Oliver S. Brown Associates. The listing is in chronological order except in cases where documents of various dates were bundled as a submission. NO: 1. 2. 3. 4. 5. 6. 7. 8. 9. TIT The Cleveland School Desegregation Decision, The Complete Memorandum Opinion and Order, Reed vs. Rhodes, U. s. District Court, Northern District of Ohio, Eastern Division. Analysis of the Special Master's Interim Report and Hearing Transcripts, prepared by Walter I. Garms, Professor of Education, University of Rochester, for the Study Group on Racial Isolation in the Public Schools (Assessment of management capabilities of Cleveland School District). Interim Report by the Special Master, submitted by Special Master Daniel R. McCarthy, (status report on study of Cleveland School District financial operations by Ernst & Ernst). Remedial Order, issued by Frank J. Battisti, Chief Judge, U. s. District Court, Northern District of Ohio, Eastern Division, (Order giving permission to close schools). Recommendations of the Special Master on Status Reports, submitted by Special Master Daniel R. McCarthy to U.S. District Court for Northern District of Ohio, Eastern Division, Reed vs. Rhodes. Special .Master's Report Regarding Finances and Administration of the Cleveland Public School District, submitted to U. S. District Court by Special Master Daniel R. McCarthy. Order, issued by Chief Judge Frank J. Battisti, u. s. District Court, (amendments to Proposed Standards for Implementation of the Remedial Orders of 4/6/81). Office on School Monitoring and Community Relations' Report - Organizational Study of the School District submitted to U. s. District Court by Leonard B. Stevens, Director (OSMCR). A School System in Distress, A Financial Crisis Repeated: The Cleveland City Schools in 1981, report prepared for the Citizens' Council for Ohio Schools by Michael J. Hoffman. A-1 DATE: 8/31/76 10/13/77 12/7/77 2/6/78 7/30/79 1/14/81 4/24/81 6/1/81 6/10/81 NO: 10. 11. 12. 13. 14. 15. 16. 17. TIT Review of Financial/Business Systems and Data Processing of the Cleveland City School District, prepared by Ernst & Whinney, Certified Public Accountants, for the Cleveland Public Schools, Cleveland Ohio. Periodic Report Submissions and District Information Management, submitted to Chief Judge Frank J. Battisti by Leonard B. Stevens, Director, OSMCR. Plan and Schedule for Implementation of Administrative and Educational Reforms in the Cleveland City School District, submitted to Chief Judge Frank J. Battisti, U. S. District Court, by Franklin B. Walter, Superintendent of Public Instruction,
This project was supported in part by a Digitizing Hidden Special Collections and Archives project grant from The Andrew W. Mellon Foundation and Council on Library and Information Resoources.