Well, now it’s official. An audit of the Belleville Board of Education for the 2013-2014 school year has confirmed what school officials and the district’s state monitor had suspected all along … that the district did, indeed, overspend its budget.
As best it could determine from BOE records available, the Fairlawn auditing firm of Lerch, Vinci & Higgins LLP has estimated that deficit at $3,712,426.
Jeff Bliss, a CPA and a partner in the firm, offered an overview of why it happened at a special BOE meeting last Tuesday and, as he proceeded, each revelation elicited groans from members of the audience filling much of Belleville High School auditorium.
Copies of a summary of the audit’s findings were available for public view at the meeting and the BOE also posted more detailed explanations from the audit on its website.
Bliss said the audit report contained a whopping 67 recommendations – an unheard of number for a typical school audit. Of those, 15 deal with what Bliss characterized as “material weaknesses in internal [fiscal] controls” which reflect “material errors in financial statements.”
Eleven are “repeats from the prior year,” he added. “A lot of policies were not being followed.”
Expenses for as many as 90 individual line items in the school budget were found to have exceeded revenues available, he said.
Bliss said the audit team was hampered in some instances because district records were incomplete, sketchy or even missing. Much of computer-stored education- and business-related information was “lost” and had to be manually reconstructed after the district server “crashed” at some point last year, he said.
Among some of the more alarming findings of the audit were that the district:
• Failed to pay quarterly claim reimbursement bills to the state Unemployment Insurance Trust Fund in a timely manner, thereby subjecting itself to penalty fees.
• Failed to remit federal and state quarterly payroll tax filings on time. Typically, Bliss said, it was “two to four quarters behind.”
• Failed to cover a short fall of $365,000 in its payroll agency account and money had to be transferred from another source to make up the gap, Bliss said. • Failed to monitor cash balances to prevent $1.4 million in overdrafts. “That’s not good business practice,” said Bliss.
• Failed to track payments to vendors involving two capital lease purchase projects made through a bank involving a $1,025,000 school roof repair and a $1,950,000 school security/network upgrade. “Transactions were not recorded in the district’s books and bills were not approved for payment by the board,” Bliss said.
• Failed to get monthly financial reports, budget line item certifications and fund status from its professionals.
• Failed in “many situations” to seek public bids for goods and services that exceeded the $36,000 bid threshold like a $72.000 contract awarded Clarity Technologies for computer supplies and IT support; failed in some cases to seek competitive quotations for contract awards exceeding $5,200; and failed to provide purchase orders authorizing those actions.
• Failed to put out for bid the hiring of cafeteria lunch aides at a cost of $180,000 – which, according to Bliss, was “outside” the contract awarded its food service management company.
• Failed to maintain a student census report as “the basis for which the district receives state school aid and some federal funding,” Bliss said. Although the district claims a student population of 4,700, “none of the records are available” to support that claim, he said.
“Now that the deficit has been certified,” Bliss told the public, “the [BOE] administration is required to adopt a corrective action plan to eliminate the deficit.”
Newly chosen BOE President Raymond Kuebler pledged that the plan “should be done in a few weeks” and “will be presented by the monitor [Thomas Egan] to the state” for review.”
After some members of the public wondered whether there would be consequences for those deemed responsible for the deficit, Kuebler volunteered that BOE members have heard that, “There is an ongoing investigation going on, but nothing [official] has been brought to our attention right now.” He did not elaborate.
Meanwhile, beyond the correction action plan there is the matter of how the BOE will deal with the overspending, aside from tightening its belt, as it has already done so, by voting not to renew contracts for a number of both non-tenured instructional and noninstructional employees for this school year.
Last week, the monitor, Egan, told The Observer that the district will be seeking a loan from the state Department of Education. “I haven’t finalized the dollar figure yet,” Egan said, “but you have to realize that the overspending is more like $4.7 million if you include the $1 million we had in reserve that we applied against the deficit.
“You’re going to need money for contingencies that may come up during the upcoming school year,” Egan said. “That’s what I’ll be discussing with the state as to the loan amount which would be an advance against future state aid, spread over five to 10 years.”
Ultimately, Egan said, that money – just the principal – would have to be paid back to the state and it’s up to the BOE to figure out how it would accomplish that. One possibility, he acknowledged, would be going to the public with a special school referendum but it would likely be a tough sell.
At last week’s meeting, while being quizzed about the current status of unemployment claims by Michael Mignone, the teachers’ union president, Bliss categorized the BOE’s mishaps as “a total breakdown of the system.”
Civic activist Jeff Mattingly was more blunt. He called it “a violation of trust – we were an ATM machine – we were abused in every way conceivable. It’s robbery, racketeering and there’s millions of dollars taxpayers are going to have to pay.”
“It is disheartening,” Kuebler agreed. “However, this board will be dedicated and committed to bringing this under control. We need to move forward and work together to ensure transparency.”