Running head: FINANCIAL ANALYSIS OF DERTOIT PUBLIC SCHOOLS 1

Financial Analysis of Detroit Public Schools

Wafaa Joumaa

Madonna University

EDU 7610

October 5, 2016
Running Head: FINANCIAL ANALYSIS OF DETROIT PUBLIC SCHOOLS 2

Financial Analysis of Detroit Public Schools

Detroit public school funded under the Proposal A that approved by Michigan

voter in 1994.The aim of Proposal A is to shift the school funding from local

level to state level. In addition retirement is now the responsibility of school

districts that put pressure on school funding especially with the economic

crisis and the increased number of retirement employees. Detroit public

schools are fiscally independent district governed by the Emergency

Manager. The district suffers from deficits in general funds because the

foundation allowance decreased due to declining in enrolment that led to

reduction in state and federal revenues. To manage the issues Detroit

schools district reduces operating expenditures such as staff, health care

,pensions, and facilities. Also the district creates a plan to solve the reduced

funding.

The expenditure were less than the final budget expenditures due decreasing in spending and

federal funding. There is a decreased in net position due to decreased in property tax revenues,

general revenues and interest payments on long-term operating debt. As a result the district

reduced expenditures in instructional; and non-instructional areas. The Emergency manager, the

Board of education and the administrations must evaluate districts needs and balance those needs

with available unrestricted resources.

There is a separate fund for general operations, food services, debt services, and capital

projects. The objectives of this funds is to provide information that help in assessing the

financing requirements. In 2015 there is an increase in fund deficit compare to the other years
Running Head: FINANCIAL ANALYSIS OF DETROIT PUBLIC SCHOOLS 3

due to increase in general fund revenue and decreased in total expenditures. The district needs to

continue in reducing staff and other expenditures in eliminating the deficits. The district plan to

address the deficits by budget reductions and revenues enhancement strategies that include staff

reductions in alignment with declining enrollment, reductions in general fund discretionary

spending, school closures.

Revenues:

Revenues
800,000,000
FY2013
600,000,000
FY 2014
400,000,000 FY2015

200,000,000

0
Local Sources State Sources Federal Sources Total Revenues

Based on the above graph the general fund revenues for the fiscal year 2015 was $660,394,413

lower than 703,332,653 for the fiscal years 2013 and 641.866.464 for the fiscal year 2014 due to

decreased in local sources. However if we compare the local sources revenues for the fiscal year

2015 we notice that the percentage decreased 8.5 % compare to the other fiscal years 2013 and

2014. Also, the State sources revenues(408,734,474) decreased 5.6% compared to the fiscal year

2013 it was $ 408,734,474.Finally the Federal sources (169,259,155 ) decreased 5.7% compared

to the fiscal year 2013 it was 179,474,855.

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Expenditures:

Current Expenditures
400000000
350000000
300000000
250000000
200000000
150000000
100000000
50000000
0
expenditurs

Total expenditures
730,000,000

720,000,000 Total expenditures

710,000,000

700,000,000
FY2013 FY2014 FY2015

The total Expenditures for the fiscal year 2015 ($714,030,093) decreased 1.6% compared to the

fiscal years 2013 (725,557,870) and 2014 (721.254.403 ) the decreased 1.5% is due to the

Districts cost effort. As we notice the Instruction decreased 1.7% and the community services

decreased 44,1%. However, the support services increased 4.4% and the Athletics increased

46,4%.According to Budgetary comparison schedule the expenditures not exceed the

appropriations at the legal level of budgetary control. Budget expenditure were decreased -8.4%
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on the net basis due to athletics operation and maintenance, school administrators and

community services.

The difference between final budgeted expenditures and actual expenditures

was insignificant, with actual expenditures being $376,000, or .26 percent
less than budgeted. The reasons for the differences, on a net basis, are as
follows:

Grant expenditures, budgeted upon award amount, were below projections

by approximately $1.7 million.

Other financing uses:

Other Financing sources/Uses

8000000
7000000
6000000 FY2013
5000000 FY2014
4000000 FY2015
3000000
2000000
1000000
0
-1000000
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0
-50,000,000
-100,000,000
FY2013
-150,000,000
FY2014
-200,000,000 FY2015
-250,000,000

Fund Balance
FY2013 FY2014 FY2015

-17578540
-46471610
-75578383 -76303384
-93881924 -93881924

-169460307 -169460307

-215931917

The net change in fund balances over the three years increased to

(46,471,610) due to inability to meet the future operational needs. Also over

the last three years The fund balance deficits of the beginning of school

years decreased as we moved to the end of the school years (215,931,917).

Running Head: FINANCIAL ANALYSIS OF DETROIT PUBLIC SCHOOLS 7

Enrollment:

FTE's
FTE's
49,873 48,904 47,238

FY2013 FY2014 FY2015 % Change

0

Based on the above graph we notice there is a steady declining K-12 funded student membership.

The enrollment showed that there is a significant declining the FTEs decreased from 49,873 for

2013 to 48,904 for 2014 and 47,238 for 2015 the percentage of decreasing -5% change .The

district suffers from a declining in students enrollment is due to increased number of charter and

private schools, also the surrounding districts began to accept Detroit residents. In addition to

that some of Detroit residents to moved to another districts such as Dearborn and Dearborn

Heights that get more funds for students. The district believes that the best way to mange the

declining number of students is by improvement of District through physical facilities, ensuring a

safe and clean environment, developing more efficient and effective organization, and improving

student achievement.
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Comparison between schools districts:

16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000 Local sources
0
State sources
Federal sources
All Sources

According to the above table Detroit public schools get less local sources

than the other districts while they get more federal sources than the other

districts. While they get the highest average in all sources compared to other

districts.

General Fund expenditures

9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
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According to the above table Detroit public schools expenditures for

basic programs and total instruction were less than the other districts .While

added need expenditures were higher than the other districts.

General Fund
300,000
250,000
200,000
150,000
100,000 Detroit Public schools
50,000 Dearbon City District
0
Gross pointe Public Schools
River rouge School District