In line with our commitment to transparency and fostering effective, connected communication as outlined in our strategic plan, NOLA-PS Evolve, NOLA Public Schools (NOLA-PS) aims to provide clarity on the ongoing discussions concerning our financial management, particularly with regard to the District Level Funding Allocation (DLFA).

 

It's important to state that there has been no misappropriation of funds or an accounting error within NOLA-PS. An accounting error involves mistakes in recording, classifying, or summarizing financial transactions, such as mathematical errors or misclassifications. In contrast, this issue stems from an overestimation or over-projection in budgeting, related to the accuracy of financial planning, where anticipated revenues were higher than actual due to factors such as conservative assumptions, lack of accurate data, or unexpected market changes.

 

In March 2024, NOLA-PS provided schools with local revenue estimates for budgeting purposes, which were higher than the actual revenues received, leading to a funding gap of approximately $25 million for the 2024-2025 school year. The discrepancy was discovered in October 2024, and NOLA-PS began working with auditors and the City of New Orleans to confirm actual tax receipts. School finance leaders were informed on October 8, and charter management organizations were briefed on October 18, with follow-up meetings held. Between March and October, the district did not identify or flag the lower actual revenues being received, and timely follow-up communication to schools was delayed, exacerbating the issue.

 

Over recent months, as NOLA-PS has engaged with its audit firm and the City to identify the causes and full impact of the error, several contributing factors have been discovered:

 

• Low collection rates: Property tax collection rates dropped to 92% in the past year (compared to 95–96% in prior years), resulting in a shortfall of approximately $9 million, influenced by economic conditions, including increased job losses in 2024.

 

• Misclassification of funds: The City incorrectly classified approximately $3.9 million in cash receipts, contributing to the revenue shortfall.

 

• Economic downturn: A notable increase in job losses in 2024 compared to the previous year affected local tax revenues.

 

• Inaccurate projections: NOLA-PS used a financial calculator tool based on the City's annual collection figures, which were not adjusted for the district's fiscal year ending June 30, 2024, leading to an overestimation of revenues.

 

• Communication gap: Limited communication from the district to schools between March and October 2024 delayed the dissemination of critical financial information.

 

This overestimation has meant that the initial funding allocations to our schools were higher than what we now know to be available. Previously, the City did not assist in revenue projections, though NOLA-PS worked with them at year-end to reconcile amounts. Now, the district actively engages in forecasting through a reconciliation process to determine actual funds before starting the DLFA process. NOLA-PS also uses Revenue Estimating Conferences, hosted by the City, to analyze economic trends, property values, and revenue projections to improve financial planning. As we continue to work with the City to verify exact tax receipts and reconcile financial differences, we acknowledge the seriousness of this error and are actively fine-tuning our protocols to prevent similar issues in the future. This includes involving school leaders earlier in the forecasting process, requesting supporting documentation from the City, and maintaining constant communication to ensure proper checks and balances. PFM, our consulting firm, is supporting us in analyzing our projection processes in concert with the City's processes to improve financial practices moving forward.

 

NOLA-PS deeply values the patience and support of our school community during this time. Our commitment remains firm: to find and implement solutions that ensure our scholars continue to have the resources needed to thrive. We are dedicated to resolving this matter transparently and keeping everyone informed as we progress. This page will be updated regularly as new information becomes available.

 

FREQUENTLY ASKED QUESTIONS (FAQS)

 

What is District Level Funding Allocation (DLFA)?
NOLA Public Schools (NOLA-PS), a predominantly charter-based public school system, uses the District Level Funding Allocation (DLFA) method to ensure that funds are distributed fairly based on the needs of students. This method allocates state and local funds to schools, prioritizing equity in resource distribution.

 

What is the issue happening with the school district's DLFA projection for 2025?
In March 2024, NOLA-PS provided schools with local revenue estimates for budgeting purposes, which were higher than the actual revenues received, leading to a funding gap of approximately $25 million for the 2024-2025 school year. Specifically, the district over-projected property and sales tax receipts, resulting in an overestimation of the funds schools were expected to receive. This discrepancy was due to the misalignment of revenue projections made on a calendar year basis instead of a fiscal year basis (ending June 30, 2024). The discrepancy was discovered in October 2024, and NOLA-PS began working with auditors and the City of New Orleans to confirm actual tax receipts. School finance leaders were informed on October 8, and charter management organizations were briefed on October 18, with follow-up meetings held. Between March and October, the district did not identify or flag the lower actual revenues being received, and timely follow-up communication to schools was delayed.

 

Several factors contributed to the overestimation:

 

• Low collection rates: Property tax collection rates dropped to 92% in the past year (compared to 95–96% in prior years), resulting in a shortfall of approximately $9 million, influenced by economic conditions, including increased job losses in 2024.
• Misclassification of funds: The City incorrectly classified approximately $3.9 million in cash receipts, contributing to the revenue shortfall.

 

• Economic downturn: A notable increase in job losses in 2024 compared to the previous year affected local tax revenues.

 

• Inaccurate projections: NOLA-PS used a financial calculator tool based on the City's annual collection figures, which were not adjusted for the district's fiscal year, leading to an overestimation of revenues.

 

• Communication gap: Limited communication from the district to schools between March and October 2024 delayed the dissemination of critical financial information.

 

How much was the overestimation in DLFA?
The current investigation by NOLA-PS staff, auditors, and the City of New Orleans suggests that the projected amount shared with schools in spring 2024 was overestimated by approximately $25 million. As a result, each school will receive less funding per student than initially planned.

 

Did NOLA-PS miscalculate the DLFA in any way?
No, NOLA-PS did not miscalculate the DLFA itself. There was no accounting error, which involves mistakes in recording, classifying, or summarizing financial transactions (e.g., mathematical errors or misclassifications). Instead, this issue was an overestimation or over-projection in budgeting, related to the accuracy of financial planning, where anticipated revenues were higher than actual due to factors such as conservative assumptions, lack of accurate data, or unexpected market changes. The overestimation resulted from inaccurate projections of local and state funding. While NOLA-PS shared higher revenue estimates with schools, the actual revenues were lower than expected.

 

Are there other factors that contributed to the overestimation?
Yes. Several factors contributed to the overestimation:

 

• Low collection rates: Property tax collection rates dropped to 92% in the past year (compared to 95–96% in prior years), resulting in a shortfall of approximately $9 million. This drop was influenced by economic conditions, including increased job losses in 2024.

 

• Misclassification of funds: The City incorrectly classified approximately $3.9 million in cash receipts, contributing to the revenue shortfall.

 

• Economic downturn: A notable increase in job losses in 2024 compared to the previous year affected local tax revenues.

 

• Inaccurate projections: NOLA-PS used a financial calculator tool based on the City's annual collection figures, which were not adjusted for the district's fiscal year ending June 30, 2024, leading to an overestimation of revenues.

 

• Communication gap: Limited communication from the district to schools between March and October 2024 delayed the dissemination of critical financial information.

 

Additionally, while projections were overstated by NOLA-PS, the City of New Orleans did not pay NOLA-PS all its share of revenues collected before June 30, 2024. As of November 21, 2024, the City reported more than $5.2 million more than what was initially reported to NOLA-PS in October 2024.

 

Why are we just hearing about this now if the funding projections were made in March?
The discrepancy was discovered in October 2024 when the school district identified the overestimation error. Between March and October, the district did not identify or flag the lower actual revenues being received, and timely follow-up communication to schools was delayed. As soon as the revenue variance was recognized, NOLA-PS began working with auditors and the City of New Orleans to confirm the actual tax receipts and notify schools. School finance leaders were informed on October 8, and charter management organizations were briefed on October 18, with follow-up meetings held to discuss the situation.

 

What financial support is available for schools to address the funding shortfall?
NOLA-PS understands the potential impact this might have on our schools, particularly in terms of per-pupil funding, which could affect various school programs. In response, the Orleans Parish School Board (OPSB) has taken the following immediate steps to mitigate any adverse effects:

 

1. Collaborate on a Short-Term Financial Plan:
   Direct the interim superintendent to work with an external financial consultant (PFM) and the district's financial advisory group to develop a short-term plan addressing the impacts of the Spring 2024 financial forecast. The plan:
   a. Includes an equitable framework for providing financial assistance to schools that demonstrate significant financial hardship due to their reliance on the Spring 2024 forecast.
   b. Identifies and details all available funding sources to help close existing funding gaps.
2. Continue Working with the City of New Orleans to Secure Funding:
   The Orleans Parish School Board (OPSB) is in the process of developing a $25 million budget amendment to address the overestimation issue. The potential amendment would involve the City of New Orleans transferring $20 million to OPSB as part of a settlement in a lawsuit between the two entities. The remaining $5 million would be allocated from OPSB's existing budget. NOLA-PS is actively engaging with the City to reconcile financial differences, including requesting supporting documentation and maintaining constant communication to ensure proper checks and balances.
3. Facilitate Timely Financial Assistance:
   Ensure that financial assistance, whether in the form of grants or loans, can be made available promptly following Board approval. Encourage all schools to prepare relevant financial documents, including budgets, forecasts, and other pertinent data, to support their applications for district financial assistance.
4. DLFA Payments to Schools:
   To date, the district's schools have consistently received their monthly DLFA allotments without any funding reductions.
5. Develop a Long-Term Funding Strategy:
   Collaborate with the external financial consultant (PFM) and the financial advisory group to create a long-term plan aimed at establishing a reliable and sustainable funding process. This includes involving school leaders earlier in the forecasting process and using Revenue Estimating Conferences hosted by the City to analyze economic trends, property values, and revenue projections.

 

Essentially, the OPSB and NOLA-PS are working to make sure schools keep running smoothly despite the funding challenges. PFM is supporting the district in analyzing projection processes in concert with the City's processes to improve financial practices moving forward.

 

How can charter school leaders assist NOLA-PS in resolving this financial matter?
Through its ongoing communication with school leaders, NOLA-PS has emphasized the need for school leaders to share current information with board members and their school communities. This transparency helps maintain trust and supports resolution efforts.

 

How could the overestimation of funding affect students and schools?
The amount of funding a school receives is based on enrollment and specific student needs (such as special education, English learners, and gifted students). The overestimation could impact these allocations, but NOLA-PS is working to bridge the funding gaps for the 2024-2025 school year and ensure minimal disruption to student programs. To date, schools have continued to receive their monthly DLFA allotments without reductions.

 

What are the next steps to prevent this from happening again?
To avoid future misestimations, NOLA-PS plans to involve school leaders earlier in the financial forecasting process to ensure greater accuracy. Previously, the City did not assist in revenue projections, though NOLA-PS worked with them at year-end to reconcile amounts. Now, the district actively engages in forecasting through a reconciliation process to determine actual funds before starting the DLFA process. NOLA-PS also uses Revenue Estimating Conferences, hosted by the City, to analyze economic trends, property values, and revenue projections to improve financial planning. This collaborative effort, along with improved communication with schools, will help improve the reliability of future projections and prevent similar issues. PFM, the consulting firm, is supporting the district in analyzing projection processes in concert with the City's processes to improve financial practices moving forward. NOLA-PS appreciates the patience and feedback from school leaders as it works through this challenge. Despite the current uncertainties, NOLA-PS remains focused on ensuring that scholars continue to learn in supportive, enriching environments.

 

What is the latest update on this financial overestimation?
During OPSB's Committee of the Whole December meeting, NOLA-PS proposed a $25 million budget amendment for the overestimation, with $20 million from a settlement with the City of New Orleans and $5 million from OPSB's budget. These funds would be used to continue monthly DLFA disbursements as projected. NOLA-PS is currently in talks with the City to obtain the $20 million in funding needed via a Cooperative Endeavor Agreement (CEA) that requires approval by OPSB. In addition, the district continues to engage with the City of New Orleans to gain a clearer understanding of the timing for property tax collections. Leadership has had meetings to review processes and improve communication between the City and its collection procedures. This includes establishing checks and balances where both parties can verify each other's calculations and align data points more accurately. Meanwhile, NOLA-PS is continuing to work with an external financial consultant (PFM) and the district's financial advisory group to find other measures to help mitigate the overestimation and continue providing financial assistance to its schools. We are providing schools with the best information available to help them understand and assess all revenue streams that contributed to school budgets and continue to update the information as we investigate. This remains an evolving situation.

 

What do we know about property value assessment estimates for Fiscal Year 2025?
Taxable assessment values are estimated to be $5,645,182,210. From January to December 2025, NOLA-PS is estimated to receive $255,783,206 in ad valorem revenues. By June 30, 2025, NOLA-PS will likely receive 94% of these revenues, which amounts to $240,436,214 in ad valorem revenue in FY2025. Revenues received in FY2025 will impact the FY2026 budget cycle.

 

WATCH THE SCHOOL BOARD DISCUSS DLFA

 

• Oct. 22, 2024 – OPSB Committee of the Whole Meeting
• Nov. 12, 2024 – OPSB Committee of the Whole Meeting
• Nov. 14, 2024 – OPSB Board Business Meeting
• Dec. 10, 2024 – OPSB Committee of the Whole
• Jan. 14, 2025 – OPSB Committee of the Whole
• Jan. 16, 2025 – OPSB Board Meeting
• Feb. 18, 2025 Upcoming-February Committee of the Whole