On October 12, 2022, the Board of Directors received a presentation by Sherwood School District leadership on the financial status of the District in the 2022-23 school year. In this presentation, the new Superintendent and new Chief Financial Officer shared findings from a thorough examination of District financial accounting practices that occurred during their first 100 days in their respective roles; these findings were also verified by third party consultants with extensive expertise in school district financial practices.
As a result of this review, it was determined that factors including overestimation of State School Fund revenues, declining enrollment, and ineffective financial reporting and account practices have lead to a significant budget deficit for the District. In order to correct this issue, the District immediately to measures to reduce spending, and on October 12th leadership shared with the Board the need to make a remaining $2.2 million in budget reductions for the current year’s budget, with additional reductions to be identified in the 2023-24 school year and beyond.
Criminal Investigation Update
In fall 2022, the Board and the Superintendent referred the matter of the budget mismanagement by previous employees to the Sherwood Police Department and the District Attorney. The matter was then referred to the Oregon Department of Justice for investigation. On January 13, 2023, the Department of Justice responded in a letter (click here to view that communication), indicating they had found no evidence of criminal behavior nor sufficient information to open a criminal investigation.
Board/Budget Committee Meetings (Related to 2022-23 Budget)
April 12, 2023 – Board Meeting
Following the Budget Committee Orientation, the Board further discussed reductions for the 2023-24 school year during their Regular Meeting later that evening (discussion starts at approximately 1:53 mark in video).
April 12, 2023 – Budget Committee Orientation #2
On April 12, 2023, the SSD Budget Committee met for their second orientation meeting for the 2023-24 budget development cycle. District staff shared an updated on the budget for the current fiscal year, provided expense and revenue forecast information, and announced the budget reductions for the 2023-24 school year.
March 1, 2023 – Budget Committee Orientation #1
On March 1, 2023, the SSD Budget Committee met for their first of two orientation meetings for the 2023-24 budget development cycle. District staff provided the Committee with information on a variety of topics, including the 2021-22 financial audit findings, expense and revenue forecasts, and enrollment projections. To view the March 1, 2023 presentation, please see the video below.
February 1, 2023 – 2023-24 Budget Reductions and Potential Levy
On February 1, 2023, District Leadership presented to the Board of Directors information about the need to identify budget reductions for the 2023-24 school year in the amount of approximately $6.5-7 million. The Board additionally discussed rate amounts for a potential education levy, which will be on the agenda for a formal vote at the February 8, 2023 regular business meeting of the Board. To view the February 1, 2023 presentation, please see the video below.
November 9, 2022 – Budget Reductions & Furlough Dates
On November 9, 2022, District leadership presented to the Board of Directors a list of budget reductions identified through a collaborative process between administrators and staff associations. These reductions, when combined with a proposal of three furlough days, met the reduction goal of $2.2million previously identified on October 12.
Following the District’s presentation, the Board voted to adopt the following three staff furlough dates:
- March 24, 2023 (Friday before Spring Break)
- June 15-16, 2023 (End of school year)
Approval of these dates also includes the following adjustments to the 2022-23 academic calendar:
- Trimester 2 last day will change from Thursday, March 16 to Friday, March 10
- Staff work day will change from Friday, March 17 to Monday, March 13
- Last day of school for K-11 students will move from Thursday, June 15 to Tuesday, June 13
- Staff work day will change from Friday, June 16 to Wednesday, June 14
- Spring conferences will be canceled. Conference dates at elementary (May 11-12) and at middle school (April 14) will become full school days.
- In the event that we have inclement weather school closures this year, we may use identified furlough dates as our weather “make up” days.
For the full 2022-23 academic calendar reflecting these adjustments, please click here.
To view the November 9 presentation to the Board with full details of the District’s budget reduction strategies, please see the below video of that meeting (the budget presentation begins at approximately the 1:18:45 minute mark in the video). For a PDF of the budget reduction plan presentation, please click here.
October 12, 2022 – Board Meeting Presentation on Budget
To view the October 12 presentation to the Board in full detail, please see the below video of that meeting (the budget presentation begins at approximately the 30:00 minute mark in the video).
Third-Party Financial Review Report
To verify the findings of the District’s own financial accounting review, District leadership engaged A & C School Business Consulting in providing a third-party review, including a comprehensive report on findings and recommendations on next steps. Please click the link below to view the full Financial Review Report submitted by A & C School Business Consulting.
*Please note: On page 5 of the consultant report, there is a chart showing the position of Special Revenue 200 funds. The negative balances within the chart are reflective of accounting procedures and not actual services provided to students.
Frequently Asked Questions
(UPDATED)What was the timeline in which the District discovered this issue, and when will reductions be identified & implemented?
- July 1-August 15 – Budget and accounting identified by fiscal team and new CFO, leading to review of prior accounting practices
- August 15-Strategic pause in spending and hiring while analysis of budget conducted; multiple positions not re-hired
- August 15-September 30 – Third-party consultants brought in by District to review financial reports and verify overestimation of revenues; need for mid-year reductions confirmed by consultant report
- September 30-October 11 – Availability of one-time funds analyzed and applied to reduce overall mid-year reduction to $2.2M
- October 12 – Presentation to Board of Directors announcing need for $2.2M remaining reduction for the 2022-23 budget
- October 13 & 17 – Meetings with employees held District-wide
- October 18 – District administrators and employee association leadership teams meet to begin identification of $2.2M in reductions
- October 19 – Parent/Community listening session held
- October 25 – School principals and department directors meet to refine reduction proposal
- October 26 – District leadership meets with employee association leadership teams to review reduction proposal
- October 27-November 8 – Reduction proposal finalized & furlough days negotiated with employee associations
- November 9 – Board of Directors meeting – Presentation of reduction proposal and approval of furlough day calendar changes by Board
- November 18-December 5 – Reductions implemented according to bargaining agreements
- February 1, 2023 – Need for additional budget reductions in the 2023-24 school year announced (Please see meeting video above for additional details.)
- March 1, 2023 – Budget Committee Orientation #1 – review of previous year audit findings, as well as expense and revenue forecasts reviewed. Please see meeting video above for additional details.)
- April 12, 2023 – Reductions identified for the 2023-24 school year announced to Board of Directors and Budget Committee (for more information on 2023-24 reductions list, please click here)
- May 31, 2023 – Budget Committee will meet to review 2023-24 proposed budget
How is the District pursuing accountability for those responsible for the budget errors identified?
UPDATED February 3, 2023 – The Board and the Superintendent previously referred the matter to the Sherwood Police Department and the District Attorney. The matter was then referred to the Oregon Department of Justice for investigation. On January 13, 2023, the Department of Justice responded in a letter (click here to view that communication), indicating they had found no evidence of criminal behavior nor sufficient information to open a criminal investigation.
How will the District ensure this does not happen again?
The District will be thoroughly reviewing the recommendations provided by A & C School Business Consulting regarding the staffing, accounting practices, and reporting methods of the Fiscal Services Department, and making appropriate changes based on those reductions to increase redundancy and “double check” mechanisms.
The report provided by the third-party consultants noted some Special Revenue fund accounts had negative balances. Is that where the deficit is coming from?
Some District programs must be supplemented by the General Fund, as those programs do not generate enough revenue independently to be sustainable without the inclusion of general operations funds in their budgets. Such programs include Nutrition Services and Athletics, as seen on the third-party consultant report. The negative balances in those Special Revenue accounts was due to a failure in accounting to complete the transfer of General Fund dollars into those accounts, and was not reflective of those programs spending beyond their budgets. In fact, all spending across schools and departments district-wide was within allocated budget amounts — the issue is that the amounts allocated were based on inaccurate revenue projections, NOT that any staff members or programs spent more than their allocated budget amounts.
Are all bond funds and grant funds accounted for? How is the District certain that bond funds have not been used inappropriately?
The budget deficit identified impacts the General Fund accounts, which are managed separately from grant and bond funds. All grant and bond fund accounts have been reviewed by our third-party expert consultants, and have been confirmed as in good standing with no deficits or accounting issues. Additionally, during the construction phase of the 2016 Capital Improvement Bond, all bond funds were managed by Cornerstone Management, who provided additional redundancy in the accounting of the bond funds.
(UPDATED) Is there a plan for the number of furlough days/number of staff positions that will be cut?
UPDATE (April 2023): Reductions for the 2023-24 school year have been identified. For more information on 2023-24 reductions, please click here.
The District’s reduction plan was shared with and approved by the Board of Directors at their November 9, 2022 meeting, including the approval of three furlough days. For full details of the reduction plan, please see the presentation slides here.
How did the District identify which staff members will be cut?
Staff reductions occur based on positions being eliminated, rather than individual staff being identified. Once positions are identified for reduction, the District uses the language in the staff association contracts to complete the riffing process in full compliance with that contract language.
What about staff groups already facing shortages? How can further cuts happen in those areas?
The identification of staff reductions was completed in full collaboration with school and department leaders, as well as our staff association leadership, to ensure that all decisions were done in consideration of all potential impacts on services to students and operational functionality.