MPS funding at risk due to missing financial data

State officials are admonishing Milwaukee Public Schools and threatening to cut off funding to the school district after MPS officials failed to submit key financial reports, some of which were due more than eight months ago, according to a recent letter to MPS Superintendent Keith Posley that was released to the public Wednesday.

After months of MPS administration failing to submit the required documents to the state Department of Education, members of the Milwaukee School Board are now taking action.

Jilly Gokalgandhi, vice president of the board, said board members are working with “subject matter experts” to determine the path forward, which could include adding additional staff, filling vacancies in the district’s finance department or bringing in outside help to prepare required reports for state officials.

In a joint statement Wednesday, school board members said they were “committed to ensuring that all requested information is provided in a timely manner.”

“We take the matter seriously and are confident that we can correct course immediately,” the statement said.

To avoid suspension of funding, MPS must submit a corrective action plan to complete all missing reports and ensure the district meets future deadlines, the DPI’s letter to Posley said. The DPI recommended that MPS hire an outside financial consultant as soon as possible to complete the plan.

“Not only are many required reports submitted incredibly late, MPS has demonstrated a pattern of submitting incomplete data and requesting data changes without having the necessary documentation to support the request,” John Johnson, deputy director of DPI, said in the letter.

In a media statement Wednesday, DPI Executive Director Sachin Chheda said DPI and Milwaukee School Board members are currently “engaged in intensive dialogue.”

“We believe they are committed to getting the district’s financial reporting back on track,” Chheda said in the statement.

Nicole Armendariz, MPS communications director, did not answer questions Wednesday about why the district’s reports were overdue.

“The district is working with the board and with our stakeholders to provide all information as quickly as possible,” she said.

The news comes as Milwaukee School Board members prepare for a possible vote on the district’s budget for the 2024-25 school year on Thursday.

It also came shortly after federal agencies cut off funding for MPS’s Head Start programs because the district failed to address problems following incidents of abuse.

MPS is behind on its financial reporting due last September

According to the letter to Posley, DPI officials said MPS failed to submit an annual report and audits for the 2022-23 school year and certified budget data for the 2023-24 school year. The documents would have been due in September and December of last year.

In the letter, Johnson said MPS’ failure to provide financial data could impact all school districts in the state because DPI needs the information from MPS to estimate by July 1 the amount of state funding each district will receive for the 2024-25 school year.

Without that information, Johnson said, the DPI would be forced to use unaudited financial data for MPS in order to publish its funding estimates on time. He noted that the “temporary measure in no way satisfies MPS’s legal obligations to provide audited data on time.”

Chheda said that while it is common for some school districts to be late in filing their financial reports, the delay at MPS stands out because it is “particularly large.”

According to the letter to Posley, DPI staff have been meeting with MPS quarterly since April 2023, monthly since this February, weekly since March 15, and daily this May.

State could deny MPS funds for special education and general support

In the letter to Posley, DPI threatened to withhold MPS’ June payment for special education services. According to the letter, the district’s June payment last year was $15.7 million.

The DPI may also withhold future state aid payments to MPS if the district fails to submit required reports, the letter said. This includes a general state aid payment in June.

Chheda told the Journal Sentinel that MPS could fully recover all withheld funds when it completes its reports.

“There is no intention to take punitive action and MPS will recover the funds to which it is entitled once the necessary financial data is provided,” Chheda said.

MPS may receive less government funding than expected due to past mistakes

In the letter, Johnson also said MPS would likely face a “significant reduction” in general state support payments in the 2024-25 school year because MPS made errors in its reported costs for the 2022-23 school year.

Gokalgandhi said board members are working to learn more about the errors and their potential impact.

School board examines the performance of Superintendent Keith Posley

Board members held a closed session Tuesday night to discuss Posley’s “employment, compensation and performance evaluation data.” Board members have not said what happened at that meeting.

Board members will further discuss Posley’s employment at their meeting on Thursday, again in closed session. The issue was added to Thursday’s agenda on Wednesday.

Previous audit of MPS revealed problems with financial reporting

A previous audit of Milwaukee public schools conducted by Baker Tilly for the 2021-22 school year found several weaknesses.

In May 2023, auditors informed board members that they had found that MPS had not prepared financial statements “in accordance with generally accepted accounting principles” or in accordance with state and federal funding plans.

In an update to the school board in December, MPS chief financial officer Martha Kreitzman said vacancies were part of the problem and the district was working to fill them.

“Have you ever faced a challenge and not known which way to go?” Kreitzman said at the December meeting. “The challenge seemed impossible. That was the situation in finance when we had key vacancies.”

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