The details of this takeover are below, as listed in a Synopsis Agenda on the full South Carolina Board of Education meeting held October 15.
"Clarendon One and the Clarendon County School District Three (Clarendon Three) are subject to legislation signed February 3, 2020, requiring their consolidation as Clarendon School District Four (Clarendon Four) effective July 1, 2021. The new Clarendon Four district currently exists (without students) and its board is preparing for the consolidation.
Clarendon One has been under review for fiscal concerns. The South Carolina Fiscal Practices Act (Section 59-20-90) creates three status levels related to fiscal concerns in a district: watch, caution, and emergency. In 2019, Clarendon One was placed on fiscal watch related to its 2018 fiscal year. In spring 2020, due to concerns about cash flow and ability to meet current obligations, the South Carolina Department of Education (SCDE) issued a notice of intention to change that status to fiscal emergency. After Clarendon One submitted information, on May 20, 2020, the SCDE agreed to modify the declaration to a fiscal caution, and gave it until July 18, 2020, to submit a recovery plan and correct the practices that led to the declaration.
With representations to, and approval of, the local legislative delegation (as required by the consolidation legislation), in July 2020, Clarendon One obtained a tax anticipation note (TAN) totaling $2.5 million.
When Clarendon One did not submit its fiscal practices plan on time, the SCDE issued notice on August 21, 2020, of fiscal emergency. The law gave the district another sixty days (until October 20, 2020) to submit a recovery plan. Clarendon One responded August 24, 2020, and has submitted additional information upon request of SCDE.
In that same August 21, 2020, notice, the SCDE also gave the district notice of the State Superintendent’s intention to consolidate administrative and professional services under Proviso 1.85, and required submission of a shared services plan by October 5, 2020. A plan was submitted September 25, 2020, and amended September 28, 2020.
Meanwhile, Clarendon Three and Clarendon Four have worked with Clarendon One on tasks necessary to prepare for consolidation and on sharing to improve services and reduce costs. As part of those efforts and the shared services plan submitted September 28, 2020, on or about September 1, 2020, Clarendon One engaged the services of David Loadholt, an experienced school business official, to convert the districts to the same financial services software and to render financial services for the district.
In the course of converting the district’s software and performing financial services, Mr. Loadholt learned that Clarendon One had not paid withholding taxes since June 2020, or retirement contributions since May 2020. He advised Clarendon One Superintendent Barbara Champagne on October 6, 2020, and in an October 7, 2020, email to Superintendent Champagne, Mr. Loadholt reported the following liability totaling $1.35 million (without interest and penalties):
'The retirement is closer to $800,000 bringing the total liability closer to $1,350,000. We will not know the exact figures until we start filing the reports and paying the liability and all penalties for Federal, State and PEBA.'
'Here are my assumptions for the attached cash flow report.
1. You pay the retirement and Federal and State tax liability in October 2020.
2. AP and payroll expenses are based off the first 3 months of 20-21.
3. You use the $2.5 million TAN that has been deposited for maintaining cash flow. 4. Revenue projections are based off like months from 19-20.'
'As you know, Clarendon 1 must repay the TAN on April 15, 2021.'
'At that point, Clarendon 1 will have a negative cash balance of approximately $2.5 million. Based on these assumptions, Clarendon 1 will continue to operate in the negative. Clarendon1 will complete the year approximately $2.3 million in the negative. We must act now to reduce this deficit.'
Mr. Loadholt recommended immediate notice to the local school board and the SCDE. In a specially called local board meeting on October 8, 2020, the Clarendon One School Board was apprised of the deficiencies, voted to pay the liabilities from the TAN and voted to freeze district spending. Despite those actions, Mr. Loadholt’s projection is still that, without additional cost cutting measures, the district will have a negative $2.3 million balance on June 30, 2021, immediately prior to consolidation."
More updates and a complete story will follow as information is given to The Manning Times.