Click here to review the OLA Audit Report, and go to audit page 62, where you will see that the OLA stated as follows:
Capital Lease and Cash Management Policies Need To Be Established
"MCPS had not adopted a policy to govern its use of long-term lease obligations to finance operations. Long-term liability levels and their related annual costs are important obligations that must be managed within available resources. An effective policy should provide guidelines to ensure MCPS manages its long term liabilities accordingly. By law, MCPS is not authorized to issue bonds or similar debt instruments to finance capital or operational needs. However, MCPS used a capital leases to purchase equipment such as buses and computer hardware. According to MCPS audited financial statements, capital lease payments through 2012 had a present value of $45.9 million at June 30, 2007, with $19.5 million due within one year."
Why is this important, you ask?
Of course, it has to do with Promethean Boards.
The County Council Education Committee called MCPS on the carpet this morning for Montgomery County Public Schools' failure to bring before the council the massive expansion of the Promethean Board initiative, which MCPS has tied to its receipt of future e-Rate rebates.
Phil Andrews, County Council President, said that MCPS had made a "serious mistake, in my view." He went on to state that MCPS should not be committing future taxpayer funds beyond what the Council had appropriated and agreed to.
Mike Knapp, also on the ED Committee, agreed that the "magnitude of the purchase never came up."
Larry Bowers, the Chief Operating Officer of MCPS, reiterated MCPS's view that MCPS didn't need appropriation authority to spend e-Rate rebates, and that it was the same type of arragement as with the buses.
Phil Andrews disagreed, and stated that by its action, MCPS had tied the hands of both bodies, MCPS and the County Council. The boards are installed and they have to be paid for now with a committment of future public funds. They will focus in the future on other long term committments, he said, and that he was sure their intentions were good, but the law (on appropriations) is clear. Crystal Clear, he emphasized. In the meantime, the council is still waiting for that data that County Council staff requested regarding the amount of all e-Rate funding received and how it has been spent.
Why is our school system being run like the cheesy "Rent to Own" appliance store? What ever happened to "wait until you can afford it" before buying it?
A related question is "Why are these lease-to-own agreements being used for school buses, copiers, and other items that are purchased in large quantities and that have a predictable lifetime?"
ReplyDeleteIf MCPS needs, say, 1000 school buses that have a lifetime of 10 years, why aren't they purchasing the buses on a rotating schedule at the rate of 100 buses per year and adopting a continual replacement schedule where 100 buses get retired each year?
By using the lease-to-own strategy, MCPS is paying interest on these capital purchases, which drives up their total aquisition cost. A rotating schedule of purchase and retirement of a portion of the fleet would certainly seem to be less expensive. Furthermore, by using these "muni-lease" agreements, MCPS is effectively circumventing the exclusive authority of the county government to issue debt.