An error in the Ministry of Education’s database that took five years to discover and resulted in overpayment to the Hastings and Prince Edward District School Board will be corrected through a draw down on the public school board’s accumulated surplus.
At the January meeting of the Hastings and Prince Edward District School Board Monday, a grant adjustment update was provided to Trustees regarding the On The Ground (OTG) capacity funding given from the Ministry of Education to schools.
On August 6, 2021, the board was notified by the Ministry of Education that as a result of recent changes to the OTG capacity of schools, the amounts of the 2021-22 grant related to school operations and school renewal would be reduced by about $1.3 million. Details were provided in report C-1 at the Committee of the Whole public meeting on September 13, 2021.
When the elementary students were first consolidated at secondary schools, errors by the Board in adjusting the OTG in the Ministry school facility database were created. The effect of the OTG errors is HPEDSB was overfunded for building operations and renewal at some secondary schools with elementary students- notably Prince Edward Collegiate Institute for 2017-18, 2018-19, 2019-20, 2020-21, and 2021-22.
At the September 13, 2021 meeting of the Committee of the Whole, Senior Board staff committed to conducting an internal review of circumstances leading to the OTG errors and to bringing the results of this review to the Audit Committee.
“I wanted to give you an update on the current situation,” said HPEDSB’s Superintendent of Business Services, Nick Pfeiffer. “We have completed an internal review into the circumstances leading to the errors in the On the Ground capacity going back to 2017, and, as a result, we have made a number of changes to the internal controls. We also reported those results of that review to the Audit Committee on November 10, 2021 at their meeting.”
The Superintendent added the Board have enlisted the Ministry of Education’s regional internal audit team in Ottawa to conduct an internal audit into this matter as well and that group will be reporting to the Audit Committee at the June meeting.
Pfeiffer said the On the Ground changes that were made correcting the errors were made at the end of last year and they were incorporated into the 2021 financial statements that the board would have seen in November. So those 2021 financial statements reflected the correct capacity for the schools and the 2021-22 revised estimates also included the corrected On the Ground capacities. And that change brought about a decrease in an expected grant from what was originally budgeted in the Spring for this current year of about $1.3 million and that grant was related to the school operations and school renewal.”
It should be noted that the size of the change in grant is below the materiality threshold and the 2019-20 financial statements will not be changed.
“When the On the Ground capacity errors were in there, they over stated the capacity of some of the secondary schools and as a result the board received more funding then it should have received for the actually size of the schools,” Superintendent Pfeiffer stated to the board. “Recently, the ministry have now reviewed the 2019/2020 school facility On the Ground capacity which also contains errors, the errors go back to 2017/2018, as a result of that review they are also implementing a similar negative grant reduction or a grant reimbursement if you like of rate over payment that the board received in 2019/2020. The actual amount is to be determined but it’s approximately $1.3 million, similar to the amount that effected 2020/2021 and 2021/2022. Because that amount is small enough it is not material from an audit point of view, the financial statements for 2019/2020 will not be restated. Instead the ministry is planning to recover the $1.3 million within this current year with board payments.”
The impact in the current year of the repayment for the 2019-20 grant is a further reduction of $1.3 million in grant payments which is not shown in the Revised Estimates. The 2021-22 Revised Estimates show increases in revenues and expenses with an overall in-year surplus for compliance of $19,605. With the decrease in payments to recover the 2019-20 grant reduction, it is projected that there will be an in-year deficit of about $1.3 million.
There is some complexity in how the grant reduction will impact accumulated surplus. Approximately $1.1 million of the grant reduction primarily relates to school operations allocation funding which was previously recognized as operating revenue. The remaining $0.2 million for the recovery of school renewal funding is to be recognized as deferred revenue. As a result, of the total recovery of $1.3 million, it is anticipated that the projected accumulated surplus at 2021-22 year-end will decrease from $12,374,424 estimated in Revised Estimates to about $11.3 million. It is expected that the $5,067,727 for school renewal deferred revenue projected at 2021-22 yearend will decrease to about $4.9 million.
The Ministry has stated that the 2017-18 and 2018-19 OTG data will remain as submitted and no further changes are required.
For more information on the OTG grant adjustment please visit http://www.hpedsb.on.ca/board-meeting-updates/board-meeting-update-january-24-2022/