HOUSE BILL No. 5257 February 1, 2000, Introduced by Reps. Switalski, Basham, Dennis, Bogardus, Julian, Baird, Wojno, DeHart, Lockwood, Jacobs, Woronchak, Gieleghem, Bovin, Minore, Van Woerkom, Law, Hager, Richner and Lemmons and referred to the Committee on Education. A bill to amend 1979 PA 94, entitled "The state school aid act of 1979," by amending sections 18 and 168 (MCL 388.1618 and 388.1768), sec- tion 18 as amended by 1999 PA 119 and section 168 as added by 1993 PA 175. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 18. (1) Except as OTHERWISE provided inanother sec-2tion ofthis act, each district or other entity shall apply the 3 money received by the district or entity under this act to sala- 4 ries and other compensation of teachers and other employees, 5 tuition, transportation, lighting, heating, ventilation, water 6 service, the purchase of textbookswhichTHAT are designated by 7 the board to be used in the schools under the board's charge, 8 other supplies, and any other school operating expenditures 9 defined in section 7. However, not more than 20% of the total 05536'99 TAV 2 1 amount received by a district under article 2 or intermediate 2 district under article 8 may be transferred by the board to 3 either the capital projects fund or to the debt retirement fund 4 for debt service. The money shall not be applied or taken for a 5 purpose other than as provided in this section. The department 6 shall determine the reasonableness of expenditures and may with- 7 hold from a recipient of funds under this act the apportionment 8 otherwise due for the fiscal year following the discovery by the 9 department of a violation by the recipient. 10 (2) For the purpose of determining the reasonableness of 11 expenditures and whether a violation of this act has occurred, 12 the department shall require that each district and intermediate 13 district have an audit of the district's or intermediate 14 district's financial and pupil accounting records conducted at 15 least annually at the expense of the district or intermediate 16 district, as applicable.,IF A DISTRICT THAT IS A PUBLIC 17 SCHOOL ACADEMY HAS CONTRACTED FOR MANAGEMENT SERVICES OR OTHER 18 OPERATIONAL SERVICES, THE AUDIT SHALL INCLUDE RECORDS OF THE CON- 19 TRACTOR RELATING TO THE MANAGEMENT OR OPERATION OF THE PUBLIC 20 SCHOOL ACADEMY. THE AUDIT SHALL BE CONDUCTED by a certified 21 public accountant or by the intermediate district superintendent, 22 as may be required by the department, or in the case of a dis- 23 trict of the first class by a certified public accountant, the 24 intermediate superintendent, or the auditor general of the city. 25 An intermediate district's annual financial audit shall be accom- 26 panied by the intermediate district's pupil accounting procedures 27 report. A district's or intermediate district's annual financial 05536'99 3 1 audit shall include an analysis of the financial and pupil 2 accounting data used as the basis for distribution of state 3 school aid. The pupil accounting records and reports, audits, 4 and management letters are subject to requirements established in 5 the auditing and accounting manuals approved and published by the 6 department. Except as otherwise provided in this subsection, a 7 district shall file the annual financial audit reports with the 8 intermediate district not later than 120 days after the end of 9 each school fiscal year and the intermediate district shall for- 10 ward the annual financial audit reports forits constituent11 districts LOCATED WITHIN THE INTERMEDIATE DISTRICT and for the 12 intermediate district, and the pupil accounting procedures report 13 for the pupil membership count day and supplemental count day, to 14 the department not later than November 15 of each year. The 15 annual financial audit reports and pupil accounting procedures 16 reports shall be available to the public in compliance with the 17 freedom of information act, 1976 PA 442, MCL 15.231 to 15.246. 18 Not later than December 1 of each year, the department shall 19 notify the state budget director and the legislative appropria- 20 tions subcommittees responsible for review of the school aid 21 budget of districts and intermediate districts that have not 22 filed an annual financial audit and pupil accounting procedures 23 report required under this section for the school year ending in 24 the immediately preceding fiscal year. 25 (3) Each district and intermediate district shall file with 26 the department by November 15 of each year an annual 27 comprehensive financial report, known as "Form B", on a form and 05536'99 4 1 in the manner prescribed by the department. IF A DISTRICT THAT 2 IS A PUBLIC SCHOOL ACADEMY HAS CONTRACTED FOR MANAGEMENT SERVICES 3 OR OTHER OPERATIONAL SERVICES, THIS ANNUAL COMPREHENSIVE FINAN- 4 CIAL REPORT SHALL INCLUDE INFORMATION ON THE SERVICES PERFORMED 5 BY THE CONTRACTOR AND ON EXPENDITURES FOR THOSE SERVICES. 6 (4) Not later than July 1, 1999, the department shall 7 approve and publish pupil accounting and pupil auditing manuals. 8 The department shall review those manuals at least annually and 9 shall periodically update those manuals to reflect changes in 10 this act. The pupil accounting manuals in effect for the 1996-97 11 school year, including subsequent revisions issued by the super- 12 intendent, shall be the interim manuals in effect until new manu- 13 als are approved and published. However, the clarification of 14 class-by-class accounting provided in the department's April 15, 15 1998 memorandum on pupil accounting procedures shall be excluded 16 from the interim manuals. 17 (5) If a district that is a public school academy purchases 18 property using money received under this act, the public school 19 academy shall retain ownership of the property unless the public 20 school academy sells the property at fair market value. 21 (6) If a district or intermediate district does not comply 22 with subsection (2) or (3), the department shall withhold all 23 state school aid due to the district or intermediate district 24 under this act, beginning with the next payment due to the dis- 25 trict or intermediate district, until the district or intermedi- 26 ate district complies with subsections (2) and (3). If the 27 district or intermediate district does not comply with 05536'99 5 1 subsections (2) and (3) by the end of the fiscal year, the 2 district or intermediate district forfeits the amount withheld. 3 Sec. 168. (1) In order to receive funds under this act, a 4 district, intermediate district, grant recipient, contractor, or 5 other entity that directly or indirectly receives funds under 6 this act shall allow access for the department or the 7 department's designee to audit all records related to a program 8 for which it receives such funds. The district, intermediate 9 district, grant recipient, contractor, or other entity shall 10 reimburse the state for all disallowances found in the audit. 11 (2) AS USED IN THIS SECTION, "CONTRACTOR" INCLUDES, BUT IS 12 NOT LIMITED TO, A CONTRACTOR WITH WHICH A DISTRICT THAT IS A 13 PUBLIC SCHOOL ACADEMY CONTRACTS FOR MANAGEMENT SERVICES OR OTHER 14 OPERATIONAL SERVICES. 05536'99 Final page. TAV