15-103

15-103. School districts; financial
mismanagement; intervention; definitions

A. The state board of education shall review allegations of school district
insolvency and gross mismanagement. The state board shall give the school district an
opportunity to respond to these allegations at a public meeting. If the state board
determines that the school district is insolvent or has grossly mismanaged its finances,
the state board shall appoint a receiver for that school district.

B. The state board shall find a school district insolvent if it finds one or more
of the following:

1. The school district is unable to pay debts as they fall due or in the usual
course of business.

2. The salaries of any teachers or other employees have remained unpaid for
forty-five days.

3. The tuition due another school district or other state institution remains
unpaid on or after January 1 of the year following the school year it was due and there
is no dispute regarding the validity or amount of the claim.

4. The school district has defaulted in payment of its bonds or interest on bonds
or in payment of rentals due any state or federal authority or private business for a
period of sixty calendar days and no action has been initiated within that period of time
to make payment.

5. The school district has contracted for any loan not authorized by law.

6. The school district has accumulated and has operated with a deficit equal to
five per cent or more of the school district's revenue control limit for any fiscal year
within the past two fiscal years or the conditions prescribed in section 15-107 have
occurred.

7. The school district's warrants have not been honored for payment by the school
district's servicing bank or by the county treasurer and the warrants have remained
unpaid for a period of more than sixty calendar days.

C. No school district shall be deemed to be insolvent pursuant to subsection B of
this section if the circumstances are the result of the failure of the state to make any
payments of monies due the school district at the time payment is due.

D. The state board of education shall have jurisdiction over all petitions
requesting that a school district be placed in receivership and a receiver be appointed
because of the school district's alleged insolvency or gross mismanagement. The state
board shall have the burden of demonstrating by a preponderance of the evidence that the
school district is insolvent or is engaged in gross mismanagement.

E. If the state board of education finds that the school district is insolvent or
has engaged in gross mismanagement, the state board shall place the school district in
receivership and appoint a receiver recommended by the state board. The state board shall
develop and adopt a list of qualified receivers to be appointed by the board.

F. On appointment, the receiver may perform any of the actions prescribed in
paragraphs 1 through 11 of this subsection and shall begin a full review and
investigation of the school district's financial affairs and submit to the state board of
education a detailed report listing the findings of that investigation that shall include
a financial improvement plan and budget that details how the school district will
eliminate any continued gross financial mismanagement and achieve financial solvency.
The plan shall include a proposed timeline for achieving financial solvency. The receiver
shall submit the report within one hundred twenty days after the receiver's appointment.
The financial improvement plan approved by the state board of education may authorize the
receiver to do any of the following:

1. Override any decisions of the school district's governing board or the school
district superintendent, or both, concerning the management and operation of the school
district, and initiate and make decisions concerning the management and operation of the
school district.

2. Attend any and all meetings of the school district's governing board and
administrative staff.

3. Supervise the day-to-day activities of the school district's staff, including
reassigning the duties and responsibilities of personnel in a manner that, in the
determination of the receiver, best suits the needs of the school district.

4. Place on extended leave, suspend or terminate for cause the school district's
superintendent or chief financial officer, or both. The receiver is not authorized to
provide a severance or buyout package to the school district's superintendent or chief
financial officer if the school district is placed into receivership by the state board
of education. A person terminated pursuant to this paragraph may appeal the receiver's
decision to the state board of education if an appeal is filed with the state board
within thirty days of receiving notice of the termination.

5. Authorize pupils to transfer from schools operated by the school district to
schools operated by another school district that is not currently in receivership.

6. Appoint a chief educational officer who shall possess the powers and duties of a
school district superintendent. A chief educational officer who is appointed pursuant to
this paragraph shall hold a valid administrative certificate.

7. Appoint a chief fiscal officer who shall possess the powers and duties of the
school district's chief school business official and any other duties regarding
budgeting, accounting and other financial matters that are assigned to the school
district by law.

8. Appoint a competent independent public accountant to audit the accounts of the
school district.

9. Reorganize the school district's financial accounts, management and budgetary
systems to improve financial responsibility and reduce financial inefficiency within the
district.

10. Establish school district fiscal guidelines and a system of internal controls,
including internal administrative controls and internal accounting controls, with
provisions for internal audits.

11. Cancel or renegotiate any contract, other than contracts of certificated
teachers who have been employed by the school district in the capacity of a certificated
teacher for more than one year immediately before the date the receiver was appointed, to
which the governing board or the school district is a party if the cancellation or
renegotiation of the contract will produce needed economies in the operation of the
district's schools. The receiver may refuse to reemploy any certificated teacher who has
not been employed by the school district for more than the major portion of three
consecutive school years as provided in section 15-536.

G. The receiver's power, authority and duties shall be effective on the date of the
receiver's appointment by the state board of education. The receiver shall perform the
receiver's duties according to the instructions of the state board of education order and
according to law. The receiver shall promptly report any violations of law, including a
violation of the uniform system of financial records, to the state board of education.

H. On review and approval of the state board of education, the receiver shall take
all necessary steps to implement the financial improvement plan and budget utilizing
those powers identified in the plan as prescribed in subsection F of this section.

I. The salary and benefits of the receiver and any officers or employees appointed
by the receiver shall be paid by the school district. The state board of education shall
determine the salary for the receiver and any officers or employees appointed by the
receiver based on amounts recommended by the state board.

J. The state board of education shall remove the school district from receivership
and dismiss the receiver and dismiss any officer or employee appointed by the receiver
thirty days after all of the following have occurred:

1. The auditor general certifies that the school district has been financially
solvent for one fiscal year.

2. The auditor general certifies that the school district's financial records are
in compliance with the uniform system of financial records and generally accepted
accounting principles.

3. The receiver certifies that the school district is no longer engaged in gross
mismanagement.

4. The state board of education has determined that the school district is able to
pay its debts as those debts become due.

K. Beginning ninety days after the submission of the first report prescribed in
subsection F of this section, the receiver shall submit a quarterly progress report to
the state board of education. The state board of education shall review the expenses and
costs of the receiver at least once each calendar quarter.

L. The state board of education shall formally review the receiver's progress every
six months. If, based on the quarterly progress reports, the state board determines that
the receiver's progress is insufficient, the state board may remove the current receiver
and appoint another receiver for the school district.

M. The state board of education may dismiss the receiver for cause or on a majority
vote of no confidence in the receiver of the state board.

N. The school district shall indemnify the receiver and any officer or employee
appointed by the receiver who is made or threatened to be made a party to any litigation
by reason of their status under this section if the receiver, officer or employee acted
in good faith and in a manner that the receiver, officer or employee reasonably believed
to be consistent with the best interest of the school district and if the receiver,
officer or employee had no reasonable cause to believe that the conduct was unlawful.

O. During the period of time that the school district is in receivership, no
member, officer, employee or agent of the school district may enter into any contract or
incur any liability on behalf of the school district for any purpose if the amount of the
contract or liability exceeds the receiver's authorized financial plan and budget for the
school district. The receiver may discipline, including, if warranted, imposing a
suspension from duty without pay, removal from office or termination of, any school
district employee or officer who violates this subsection.

P. This section does not create a private cause of action against the school
district or its officers, directors, board members or employees.

Q. The assumption of control of the school district by the receiver shall in no way
interfere with the election or reelection of school district governing board members.

R. This section shall not interfere with a school district's ability to declare
bankruptcy under federal law.

S. The state board of education shall continue to monitor and offer technical
assistance to a school district for two years after its removal from receivership.

T. All information received and records or reports kept by the state board of
education during an investigation resulting from a complaint against a receiver appointed
pursuant to this section or section 15-107 are confidential and not a public record.

U. The state board of education or the department of education shall immediately
notify the auditor general if the board or department has knowledge that a superintendent
or chief financial officer who was employed at the school district at the time the school
district was placed in receivership is currently employed in another school district or
charter school in this state.

V. For the purposes of this section:

1. "Gross mismanagement" means that the school district's officers or employees
committed or engaged in gross incompetence or systemic and egregious mismanagement of the
school district's finances or financial records.

2. "Notice" means written notice personally served or delivered by certified mail,
return receipt requested.

3. "Receiver" means an individual appointed by the state board of education from
the persons recommended by the state board for the purpose of managing a school district
placed in receivership by the state board of education.

4. "Receivership" means the state or condition of being under the control of the
receiver appointed by the state board of education.

5. "Superintendent" means the chief executive officer of the school district.