Arkansas Code
Subchapter 19 - Arkansas Fiscal Assessment and Accountability Program
§ 6-20-1904. Indicators of fiscal distress

(a) A school district meeting any of the following criteria may be identified by the Division of Elementary and Secondary Education to be a school district in fiscal distress upon final approval by the State Board of Education:
(1)
(A) A declining balance determined to jeopardize the fiscal integrity of a school district.
(B) However, capital outlay expenditures for academic facilities from a school district balance shall not be used to put the school district in fiscal distress;

(2) An act or violation determined to jeopardize the fiscal integrity of a school district, including without limitation:
(A) Material failure to properly maintain school facilities;
(B) Material violation of local, state, or federal fire, health, or safety code provisions or law;
(C) Material violation of local, state, or federal construction code provisions or law;
(D) Material state or federal audit exceptions or violations;
(E) Material failure to provide timely and accurate legally required financial reports to the division, Arkansas Legislative Audit, the General Assembly, or the Internal Revenue Service;
(F) Insufficient funds to cover payroll, salary, employment benefits, or legal tax obligations;
(G) Material failure to meet legally binding minimum teacher salary schedule obligations;
(H) Material failure to comply with state law governing purchasing or bid requirements;
(I) Material default on any school district debt obligation;
(J) Material discrepancies between budgeted and actual school district expenditures;
(K) Material failure to comply with audit requirements;
(L) Material failure to comply with any provision of the Arkansas Code that specifically places a school district in fiscal distress based on noncompliance;
(M) Material failure to comply with § 6-20-1913 or division rules concerning the minimum qualifications for a general business manager; or
(N) Material failure to comply with reporting, debt approval, or other requirements placed on a public school district that has been returned to local control under § 6-20-1912; or

(3) Any other fiscal condition of a school district deemed to have a detrimental negative impact on the continuation of educational services by that school district.

(b)
(1) By November 1 of each year, the division shall report to the superintendent of a public school district if the division is aware that the public school district has experienced two (2) or more indicators of fiscal distress, as described in subsection (a) of this section or in division rules, in one (1) school year that the division deems to be at a nonmaterial level but that without intervention could place the public school district in fiscal distress.
(2) By November 1 of each year, the superintendent of a public school district shall report to the division if the superintendent is aware the public school district has experienced two (2) or more indicators of fiscal distress, as described in subsection (a) of this section or in division rules, in one (1) school year that the superintendent deems to be at a nonmaterial level but that without intervention could place the public school district in fiscal distress.
(3)
(A) The division and the superintendent shall review all data related to the nonmaterial indicators of fiscal distress.
(B)
(i) Within thirty (30) days of the division's determination that the public school district may be experiencing fiscal distress at a nonmaterial level, the division shall provide a notice to the public school district's superintendent and board of directors that:
(a) Describes the nonmaterial indicators of fiscal distress that could jeopardize the fiscal integrity of the public school district if not addressed; and
(b) Identifies the support available from the division to address each nonmaterial indicator of fiscal distress.

(ii) The board of directors of the public school district shall place on the agenda for the next regularly scheduled meeting of the board of directors of the public school district a discussion of the notice of nonmaterial indicators of fiscal distress.

(4)
(A) If a public school district is determined to be experiencing fiscal distress at a nonmaterial level under this subsection, the public school district shall:
(i) Comply with all requirements established by the state board in rules, including without limitation review of the public school district's budget, reporting, and the hiring and termination of staff; and
(ii) Not incur any debt without the prior written approval of the division.

(B) The division may request that Arkansas Legislative Audit conduct an annual audit of a public school district that is determined to be experiencing fiscal distress at a nonmaterial level under this subsection.