DENVER – After our audit, Denver Preschool Program board members and city administrators made significant improvements that will do more to support kids in our community, according to Denver Auditor Timothy M. O’Brien, CPA.
“The Denver Preschool Program is doing a lot of good for the community and for our kids,” Auditor O’Brien said. “Thanks to improvements in how the program manages public funds and its investments, I hope even more money will be available to support education at a time when we need it most.”
Our follow-up work found every recommendation from our 2019 audit was implemented this year. That includes improved monitoring of taxpayers’ funding, better management of investments, and stronger contract administration by the city.
In 2006, Denver voters approved a city ordinance that provides a city sales and use tax to fund the Denver Preschool Program. This program served more than 4,400 children in the 2018-2019 school year. We have also found this tax-funded nonprofit structure was the model for other new tax initiatives in Denver.
“Other tax initiatives are looking to the preschool program as they set up their own budgets, strategic plans, investments and governance,” Auditor O’Brien said. “I’m pleased to see the preschool program’s improvement in the past year, and I hope this strengthened example will act as a guide for other organizations.”
Denver Preschool Program Inc. is a nonprofit that operates independently using dedicated tax dollars, but the city is still responsible for financial oversight of the program. The program offers tuition credits to qualifying families and offers financial support for quality improvement to preschool providers.
In our 2019 audit, we found the preschool program was not spending as much as it should each year on program services. While spending less and bringing in steady tax revenue, the program accumulated $20 million in unspent funds that were then invested in a low-yield money market savings account.
In February, the board of directors approved a new investment policy that should lead to higher interest returns that can then be reinvested to support even more Denver kids and preschools. The new investment policy, together with the Denver Preschool Program’s existing strategic plan, position the organization to guide investments and be mindful of social impacts of investment returns.
“The Denver Preschool Program is on the right track,” Auditor O’Brien said. “By using reserves appropriately, more resources will be available for the city’s kids today, and in the future, the program should be able to bring in more revenue through sound investment practices.”
The new investment policy says investment objectives should reflect the program’s short- and long-term goals, while maximizing risk and exercising care with any investments.
At the time of our follow-up work, we found the Denver Preschool Program plans to spend 100% of estimated tax revenue in 2020 on program services. The program also has a new operating reserve policy that discusses short- and long-term financial forecasting and planning, and it identifies target amounts for the reserves.
Other improvements since the original audit include better city administration of the contract with Denver Preschool Program Inc. and improvements to the board of directors’ policies, review practices, and training.
Because of these improvements, the Denver Preschool Program is in a better position to continue its support of quality preschool services for Denver residents. These actions should create greater opportunities to expand program participation, which means offering learning opportunities to more Denver children.