INTEROFFICE MEMORANDUM TO: MR. MICHAEL J. SENTANCE, STATE SUPERINIENDENT FROM: ANDY CRAL SUBJECT: DEPARTMENTAL OPERATING BUDGET AND REPORTING STRUCTURE DATE: APRIL 4, 2017 cc: DR. DEE FOWLER, CHIEF OF STAFF Upon conducting preliminary analyses ofthe fiscal outlook for our department, I wanted to make you aware of serious concerns that I have and offer action items for you to consider in the immediate term pending development of our FY 18 budget and a longer term fiscal plan that wil suppor. your strategic direction. In general, the base operations of the Alabama State Department of Education (ALSDE) are funded byan Operations and Maintenance (O82M) legislative appropriation and various service charges/assessments from other fund sources and activities. Considering financial drivers such as employee headcount, pay rates, benefit costs, appropriation/ funding estimates, etc. financial modeling under current assumption sets indicates a path of financial deterioration and insolvency if adjustments are not made. Accordingly, leading up to ALSDE operational budget development for FY 2018, Tam recommending the following immediate actions: 1. Implement a freeze on hiring for positions funded out of the ALSDE’s O&M, Shared Services and Information Services funds 2. Scrutinize future position vacancies for these same fund sources for potential reduction in order to contain/reduce our personnel costs footprint 3. Consider altemative funding sources for current occupied positions based on an evaluation of functional roles where practical and allowable 4. Consider other measures that-will serve to contain and reduce personnel and other costs given current financial assumptions and risks Additionally I would like to request reconsideration of the recently adopted organizational restructuring as it relates to the position of Chief Financial Officer (CFO) and the associated responsibilities. I believe thata more appropriate reporting line for the CFO position in our case ‘would be to report directly to the State Superintendent of Education, ‘This essentially mirrors the statutorily established structure that exists in school systems across our state. I believe that this reporting structure, among other things, recognizes the fiduciary reporting responsibilities to the State Board of Education, the necessity for the CFO to maintain independence and objectivity incarrying out the responsibilities of the position, and mitigates the potential for hierarchical barriers to sound fiscal governance and reporting. Iam available at your convenience to discuss this in more depth. ‘Thank you for your consideration of these matters.