By ZACH LAIRD, InDepthNH.org

CONCORD — Another public hearing was held Thursday morning at the State House for House Bill 121, regarding school district financial requirements and district probation processes.

Rep. Kristin Noble, R-Bedford, said the bill is a nongermane amendment that happened in response to the budget situation in the Claremont School District, which now faces a $5 million deficit.

“This bill requires that school audits be completed no later than one year after the close of books,” Noble said. “A copy of the audit is to be posted on the district’s website and reviewed at the next meeting. If the audit is not completed, the Department of Revenue Administration (DRA) may levy a fine of up to $500 per day. The DRA, in consultation with the Department of Education (DOE) commissioner, may require a financial or forensic audit to be done.”

Noble said the bill also eliminates the current option for districts to elect an auditor. The auditors must be an independent firm or public accountant certified by the state. The DOE commissioner may withhold state aid if a district is more than six months late in complying with audit requirements, but only after determining there is just cause.

Noble noted that last year, legislation was signed into law allowing a charter school to be put on probation. This bill applies the same criteria to traditional public schools under the same circumstances. These include: failure to adhere to generally accepted financial management standards; if the district has become insolvent or unstable; and if the district has failed to comply with state or federal reporting requirements, now including the audits.

“If a district is placed on probation, everyone will be notified, including the governor, the legislature and the public,” Noble said. “The DOE and state Board of Education will work with the district on a plan to address the issues, and the district can remain on probation for up to six months. If at that point the issues have not been addressed, the DOE shall appoint or hire an administrator for a period of up to one year to oversee all corrective actions.”

Mark Manganiello, an administrator with the Bureau of School Finance for the DOE, said requiring all districts to be audited by licensed, independent public accountants – as well as requiring audits to be posted on the governing body’s website with a public meeting immediately after – are steps in the right direction.

Manganiello said about 55% of school districts can complete an audit within 12 months and submit it to the DRA.

“To say you (the district) are now six months after that, it’s probably good to have a conversation with the DOE about why you’re not getting that audit in, at least within 18 months … And us making the decision, working with the auditors and seeing what the issue is to determine if we need to hold state aid, seems like a reasonable metric to hold districts to,” Manganiello said.

Manganiello added that the DOE recommends the legislature seek input from the state Board of Education about how districts would be put on probation and to what capacity it can be done.

He said based on the standards in the bill, a lot of districts would qualify for probation, and that “we don’t want to have dozens of districts on probation, because it would overwhelm the system and districts.” 

Manganiello also said he thinks the state Board of Education could develop processes to mitigate how many districts would go on probation.

State Sen. Cindy Rosenwald, D-Nashua, asked Manganiello what the impact on students would be if state funding for schools were held.

“There’s tradeoffs,” Manganiello said. “In FY24, we had two charter schools close mid-year because they were in a financial crisis. That really hurts students. When you close a school mid-year, that is an outcome the DOE does not want.

“Claremont saw a 10 percent enrollment decline, (so) by not managing their finances on the front end, students have been hurt. By not having their house in order – whether it’s a charter school or Claremont – students have been impacted negatively, and their learning environment has been disrupted. We want to prevent that.”

No immediate action was taken on the bill during the meeting.