Department of Education Enforcement of PA 116 (The Budget Act)
School Advisor, 2007 Issue No. 1  

By now, everyone is aware of the Department of Education’s review of the district’s FYE 2005 financial statements for compliance with the Budget Act. Basically for FYE 2005, they considered any expenditure variance greater than 1 percent of the total budgeted expenditures as well as any transfer out and other use variance greater than 1 percent of the total budget for that category as a violation. Violations result in a letter being sent to the district. If an adequate response is not received from the district, the department will refer the district to the Attorney General’s office for possible further action. We understand that no districts were actually referred to the Attorney General for 2005.

While there has been some controversy over the interpretation of the budget act as it relates to revenue, the Department of Education will, beginning with the FYE 2006 financial statements, also consider certain revenue shortfalls as also being violations. For a revenue shortfall to be a violation, it has to represent a variance greater than 1 percent of the total budgeted revenue, and the district’s fund balance must have been depleted beyond what had been approved by the school board.