Summary of Requirements for Fiscal Caution
This page describes the summary of requirements for Fiscal Caution and its provisions as allowed for by Section 3316.031 of Revised Code.
For questions regarding any of the information provided here, please email FiscalOversight@education.ohio.gov.
When Fiscal Caution is Declared
(A) The Director of Education and Workforce shall develop guidelines for identifying "fiscal practices and budgetary conditions" that, if uncorrected, could lead to future declaration of Fiscal Watch or Fiscal Emergency.
(B)(1) The Director of Education and Workforce may declare Fiscal Caution, after consulting with the local board of education, if it is determined through the five-year forecast that conditions exist that could result in Fiscal Watch or Fiscal Emergency.
(2) If the Auditor of State reports to the Director of Education and Workforce that any of "conditions or practices" exist that could result in Fiscal Watch or Fiscal Emergency, the Director of Education and Workforce may declare Fiscal Caution, after consulting with the local board of education.
(3) The Director of Education and Workforce must declare Fiscal Caution if the Auditor of State certifies a deficit that is > 2% but < 8% of prior year general fund revenue and elects not to place the district in Fiscal Watch.
(C) The Director of Education and Workforce shall notify district of declaration of Fiscal Caution and request "written proposal" for correcting the conditions that led to Fiscal Caution and for preventing further fiscal difficulties that could lead to Fiscal Watch or Fiscal Emergency.
(D) While under Fiscal Caution, the Department of Education and Workforce:
- May visit and inspect the district.
- Shall provide technical assistance in implementing proposals.
- May make recommendations concerning the board’s proposals.
(E) If the Director of Education and Workforce finds a district has not made reasonable proposals or taken action to correct the practices or conditions that lead to the declaration, the Director of Education and Workforce may report to the Auditor of State that Fiscal Watch is necessary to prevent further fiscal decline. [see Revised Code 3316.03(A)(3)]
Guidelines for Fiscal Caution
The Department of Education and Workforce, in consultation with the Auditor of State, has established the following “fiscal practices and budgetary conditions” as guidelines for the Director of Education and Workforce to place school districts in Fiscal Caution. Failure to correct any of the following situations could eventually lead to the Auditor of State declaring a school district to be in a state of Fiscal Watch or Fiscal Emergency.
1. When a district fails to submit or update a five-year forecast as required by section 5705.391 of the Revised Code or by Administrative Rule 3301-92-04.
2. When there is a potential current year deficit with no acceptable plan in place to avoid the projected deficit.
3. When a district notified under division (B) of section 5705.391 of the Revised Code fails to submit an acceptable plan to address a potential future year deficit within the timeframe allowed.
4. Whenever the Department discovers any other “fiscal practices or conditions” that could lead to a declaration of Fiscal Watch or Emergency through the examination of a school district’s five-year forecast required under division (B) of section 5705.301 of the Revised Code.
5. When the Auditor of State certifies a deficit between 2% and 8% of prior year general fund revenue and elects not to place the district in Fiscal Watch, the district must be placed in Fiscal Caution as required by section 3316.031(B)(3) of the Revised Code.
6. When the Auditor of State declares that a school district’s financial records are unauditable.
7. When the Auditor of State reports that a district has not complied with section 5705.412 of the Revised Code by attaching a signed certificate to an appropriation measure, qualifying contract or salary schedule.
8. When the Auditor of State identifies significant deficiencies, material weaknesses, direct and material legal noncompliance or management letter comments which, in the opinion of the Auditor, the aggregate effect of all such reported issues has an significant effect on the financial condition of the district.
Consultation with School District Board of Education
Section 3316.031(B) of the Revised Code requires the Department to consult with the local board of education before declaring a district to be in Fiscal Caution. The written and/or verbal communication between the Department and/or the Auditor of State and the school district will constitute the required consultation with the local board of education. Typically such communication is with the district superintendent and treasurer but may involve the board president. If the Director of Education and Workforce decides to place the district in Fiscal Caution, the local board of education shall receive written notice at least 10 business days prior to the effective date of the declaration. The written notice will be sent to the board president, district superintendent, and treasurer and shall include but not be limited to an explanation of the circumstances that led to the decision and if there are any steps the school district could take to avoid the declaration.
What does it mean to be in Fiscal Caution?
State law requires districts to provide written proposals for discontinuing or correcting the practices and conditions that led to the declaration of Fiscal Caution. Districts will be given approximately 60 days to provide a written proposal. At the request of the district, the Department may grant the district additional time to submit its proposal. The law also allows the Department to visit and inspect districts while under Fiscal Caution. As part of the inspection process, the Department may monitor the district’s financial situation on a monthly basis. If the Department finds that a district has not made reasonable proposals or has not taken action to discontinue or correct the practices or conditions that led to Fiscal Caution, the Director of Education and Workforce may recommend to the Auditor of State that the district be placed in Fiscal Watch or Emergency. Finally, the law allows the Auditor of State to conduct a performance audit of the district at the Department’s expense.
Release from Fiscal Caution
A district in Fiscal Caution cannot be released in the same fiscal year in which the declaration was made. A district may be released from Fiscal Caution the following fiscal year if the Department determines that the corrective actions have been or are being implemented. The Director of Education and Workforce shall notify the local board president, the district superintendent, and the treasurer of the district’s release from Fiscal Caution.
Last Modified: 11/2/2023 4:03:54 PM