ENROLLED 2012 Legislature SB 368, 1st Engrossed 2012368er 1 2 An act relating to financial emergencies; amending s. 3 218.39, F.S.; requiring the Auditor General to notify 4 each member of the governing body of a local 5 governmental entity, district school board, charter 6 school, or charter technical career center of certain 7 fund balance deficits; amending s. 218.503, F.S.; 8 removing a condition under which local governmental 9 entities, charter schools, charter technical career 10 centers, and district school boards are subject to 11 certain review and oversight by the Governor, the 12 charter school sponsor, the charter technical career 13 center sponsor, or the Commissioner of Education; 14 requiring a local governmental entity or district 15 school board to provide requested information within a 16 specified period of time; authorizing a financial 17 emergency board for a local governmental entity or 18 district school board to consult with other 19 governmental entities for the consolidation of 20 administrative direction and support services; 21 authorizing the Governor or Commissioner of Education 22 to require a local governmental entity or district 23 school board to include provisions implementing the 24 consolidation, sourcing, or discontinuance of all 25 administrative direction and support services in 26 certain plans; providing that the members of the 27 governing body of a local governmental entity or the 28 members of a district school board who fail to resolve 29 a state of financial emergency are subject to 30 suspension or removal from office; providing an 31 effective date. 32 33 Be It Enacted by the Legislature of the State of Florida: 34 35 Section 1. Subsection (5) of section 218.39, Florida 36 Statutes, is amended to read: 37 218.39 Annual financial audit reports.— 38 (5) At the conclusion of the audit, the auditor shall 39 discuss with the chair of the governing body of the local 40 governmental entity or the chair’s designee, the elected 41 official of each county agency or the elected official’s 42 designee, the chair of the district school board or the chair’s 43 designee, the chair of the board of the charter school or the 44 chair’s designee, or the chair of the board of the charter 45 technical career center or the chair’s designee, as appropriate, 46 all of the auditor’s comments that will be included in the audit 47 report. If the officer is not available to discuss the auditor’s 48 comments, their discussion is presumed when the comments are 49 delivered in writing to his or her office. The auditor shall 50 notify each member of the governing body of a local governmental 51 entity, district school board, charter school, or charter 52 technical career center for which: 53 (a) Deteriorating financial conditions exist that may cause 54 a condition described in s. 218.503(1) to occur if actions are 55 not taken to address such conditions. 56 (b) A fund balance deficit in total or for that portion of 57 a fund balance not classified as restricted, committed, or 58 nonspendable, or a total or unrestricted net assets deficit, as 59 reported on the fund financial statements of entities required 60 to report under governmental financial reporting standards or on 61 the basic financial statements of entities required to report 62 under not-for-profit financial reporting standards, for which 63 sufficient resources of the local governmental entity, charter 64 school, charter technical career center, or district school 65 board, as reported on the fund financial statements, are not 66 available to cover the deficit. Resources available to cover 67 reported deficits include fund balance or net assets that are 68 not otherwise restricted by federal, state, or local laws, bond 69 covenants, contractual agreements, or other legal constraints. 70 Property, plant, and equipment, the disposal of which would 71 impair the ability of a local governmental entity, charter 72 school, charter technical career center, or district school 73 board to carry out its functions, are not considered resources 74 available to cover reported deficits. 75 Section 2. Paragraph (e) of subsection (1) and subsection 76 (3) of section 218.503, Florida Statutes, are amended, and 77 subsection (6) is added to that section, to read: 78 218.503 Determination of financial emergency.— 79 (1) Local governmental entities, charter schools, charter 80 technical career centers, and district school boards shall be 81 subject to review and oversight by the Governor, the charter 82 school sponsor, the charter technical career center sponsor, or 83 the Commissioner of Education, as appropriate, when any one of 84 the following conditions occurs: 85(e) A fund balance deficit in total or for that portion of86a fund balance not classified as restricted, committed, or87nonspendable, or a total or unrestricted net assets deficit, as88reported on the fund financial statements of entities required89to report under governmental financial reporting standards or on90the basic financial statements of entities required to report91under not-for-profit financial reporting standards, for which92sufficient resources of the local governmental entity, charter93school, charter technical career center, or district school94board, as reported on the fund financial statements, are not95available to cover the deficit. Resources available to cover96reported deficits include fund balance or net assets that are97not otherwise restricted by federal, state, or local laws, bond98covenants, contractual agreements, or other legal constraints.99Property, plant, and equipment, the disposal of which would100impair the ability of a local governmental entity, charter101school, charter technical career center, or district school102board to carry out its functions, are not considered resources103available to cover reported deficits.104 (3) Upon notification that one or more of the conditions in 105 subsection (1) have occurred or will occur if action is not 106 taken to assist the local governmental entity or district school 107 board, the Governor or his or her designee shall contact the 108 local governmental entity or the Commissioner of Education or 109 his or her designee shall contact the district school board to 110 determine what actions have been taken by the local governmental 111 entity or the district school board to resolve or prevent the 112 condition. The information requested must be provided within 45 113 days after the date of the request. If the local governmental 114 entity or the district school board does not comply with the 115 request, the Governor or his or her designee or the Commissioner 116 of Education or his or her designee shall notify the members of 117 the Legislative Auditing Committee who may take action pursuant 118 to s. 11.40. The Governor or the Commissioner of Education, as 119 appropriate, shall determine whether the local governmental 120 entity or the district school board needs state assistance to 121 resolve or prevent the condition. If state assistance is needed, 122 the local governmental entity or district school board is 123 considered to be in a state of financial emergency. The Governor 124 or the Commissioner of Education, as appropriate, has the 125 authority to implement measures as set forth in ss. 218.50 126 218.504 to assist the local governmental entity or district 127 school board in resolving the financial emergency. Such measures 128 may include, but are not limited to: 129 (a) Requiring approval of the local governmental entity’s 130 budget by the Governor or approval of the district school 131 board’s budget by the Commissioner of Education. 132 (b) Authorizing a state loan to a local governmental entity 133 and providing for repayment of same. 134 (c) Prohibiting a local governmental entity or district 135 school board from issuing bonds, notes, certificates of 136 indebtedness, or any other form of debt until such time as it is 137 no longer subject to this section. 138 (d) Making such inspections and reviews of records, 139 information, reports, and assets of the local governmental 140 entity or district school board as are needed. The appropriate 141 local officials shall cooperate in such inspections and reviews. 142 (e) Consulting with officials and auditors of the local 143 governmental entity or the district school board and the 144 appropriate state officials regarding any steps necessary to 145 bring the books of account, accounting systems, financial 146 procedures, and reports into compliance with state requirements. 147 (f) Providing technical assistance to the local 148 governmental entity or the district school board. 149 (g)1. Establishing a financial emergency board to oversee 150 the activities of the local governmental entity or the district 151 school board. If a financial emergency board is established for 152 a local governmental entity, the Governor shall appoint board 153 members and select a chair. If a financial emergency board is 154 established for a district school board, the State Board of 155 Education shall appoint board members and select a chair. The 156 financial emergency board shall adopt such rules as are 157 necessary for conducting board business. The board may: 158 a. Make such reviews of records, reports, and assets of the 159 local governmental entity or the district school board as are 160 needed. 161 b. Consult with officials and auditors of the local 162 governmental entity or the district school board and the 163 appropriate state officials regarding any steps necessary to 164 bring the books of account, accounting systems, financial 165 procedures, and reports of the local governmental entity or the 166 district school board into compliance with state requirements. 167 c. Review the operations, management, efficiency, 168 productivity, and financing of functions and operations of the 169 local governmental entity or the district school board. 170 d. Consult with other governmental entities for the 171 consolidation of all administrative direction and support 172 services, including, but not limited to, services for asset 173 sales, economic and community development, building inspections, 174 parks and recreation, facilities management, engineering and 175 construction, insurance coverage, risk management, planning and 176 zoning, information systems, fleet management, and purchasing. 177 2. The recommendations and reports made by the financial 178 emergency board must be submitted to the Governor for local 179 governmental entities or to the Commissioner of Education and 180 the State Board of Education for district school boards for 181 appropriate action. 182 (h) Requiring and approving a plan, to be prepared by 183 officials of the local governmental entity or the district 184 school board in consultation with the appropriate state 185 officials, prescribing actions that will cause the local 186 governmental entity or district school board to no longer be 187 subject to this section. The plan must include, but need not be 188 limited to: 189 1. Provision for payment in full of obligations outlined in 190 subsection (1), designated as priority items, whichthatare 191 currently due or will come due. 192 2. Establishment of priority budgeting or zero-based 193 budgeting in order to eliminate items that are not affordable. 194 3. The prohibition of a level of operations which can be 195 sustained only with nonrecurring revenues. 196 4. Provisions implementing the consolidation, sourcing, or 197 discontinuance of all administrative direction and support 198 services, including, but not limited to, services for asset 199 sales, economic and community development, building inspections, 200 parks and recreation, facilities management, engineering and 201 construction, insurance coverage, risk management, planning and 202 zoning, information systems, fleet management, and purchasing. 203 (4)(a) Upon notification that one or more of the conditions 204 in subsection (1) have occurred or will occur if action is not 205 taken to assist the charter school, the charter school sponsor 206 or the sponsor’s designee and the Commissioner of Education 207 shall contact the charter school governing body to determine 208 what actions have been taken by the charter school governing 209 body to resolve or prevent the condition. The Commissioner of 210 Education has the authority to require and approve a financial 211 recovery plan, to be prepared by the charter school governing 212 body, prescribing actions that will resolve or prevent the 213 condition. 214 (b) Upon notification that one or more of the conditions in 215 subsection (1) have occurred or will occur if action is not 216 taken to assist the charter technical career center, the charter 217 technical career center sponsor or the sponsor’s designee and 218 the Commissioner of Education shall contact the charter 219 technical career center governing body to determine what actions 220 have been taken by the governing body to resolve or prevent the 221 condition. The Commissioner of Education may require and approve 222 a financial recovery plan, to be prepared by the charter 223 technical career center governing body, prescribing actions that 224 will resolve or prevent the condition. 225 (c) The Commissioner of Education shall determine if the 226 charter school or charter technical career center needs a 227 financial recovery plan to resolve the condition. If the 228 Commissioner of Education determines that a financial recovery 229 plan is needed, the charter school or charter technical career 230 center is considered to be in a state of financial emergency. 231 232 The Department of Education, with the involvement of sponsors, 233 charter schools, and charter technical career centers, shall 234 establish guidelines for developing a financial recovery plan. 235 (5) A local governmental entity or district school board 236 may not seek application of laws under the bankruptcy provisions 237 of the United States Constitution except with the prior approval 238 of the Governor for local governmental entities or the 239 Commissioner of Education for district school boards. 240 (6) The failure of the members of the governing body of a 241 local governmental entity or the failure of the members of a 242 district school board to resolve a state of financial emergency 243 constitutes malfeasance, misfeasance, and neglect of duty for 244 purposes of s. 7, Art. IV of the State Constitution. 245 Section 3. This act shall take effect July 1, 2012.