Should SC reexamine agreement of In-Direct Costs charged to the Schools?

On This week’s School Committee Agenda there is this motion by Bob Hoey: Request the Superintendent to establish a task force in collaboration with City Administration to review, revise and recommend a new maintenance of Efforts Agreement (Indirect Cost).

The existing agreement was authored by former Deputy Supt. Jay Lang and agreed upon by then Manager Lynch and that School Committee. Dr. Lang has on several occasions when questioned about it, stated that this agreement is very much designed and slanted in favor of the School Dept.

Dept. of Ed regulations state that once the one method for allocating the municipal expenditures is selected by the school district it will be used consistently from year to year which Lowell has. That is up to the upcoming budget year where the CFO/Supt. seem to want to change it.

It appears it is against DESE and the Dept. of Educations existing guidelines for the School Dept. to make changes that have not been agreed upon. (603 CMR 10.00 one method shall be chosen by the school district and used consistently from year to year.)

If the current School Committee at the request of or with support from the Superintendent vote to reopen the agreement and City Manager agrees to look at this, the School Dept. runs the risk of having these chargebacks increased rather than decreased.

If the City and School Administration can’t come to an agreement then the Dept. of Education has to be notified and the Commissioner shall, upon receipt of such notice, appoint a designee to conduct an informal hearing to encourage the parties to reach an agreement and make a final determination on the issues in dispute if no agreement is reached within a reasonable time period. The Commissioner shall consult with and seek assistance from the Commissioner of Revenue or his designee in attempting to resolve such disputes.

In other words, be careful what you wish for or you may end up on the losing end even more. Based on what I know from surrounding communities and from what the former City CFO has told me about this agreement (I’ve inquired before) along with what Chelmsford Supt. Lang has stated into how this was created, I’d advise this School Committee to leave the existing agreement in place rather than risking even more chargebacks.

I think first off I would request the Asst. Supt. of Finance to fill in the Excel sheet started by then Deputy Supt. Lang so everyone can see the year over year increase, then ask for the Manager or CFO to attend a fiscal sub-committee meeting to review and discuss rather than try to force a review and revision that probably benefits the City.

Here is an explanation of In-Direct Costs and a look at what the City presently charges. Most of this information can be found by searching the DESE site and looking at CMR 603 10.00

In-Direct Costs (Other Municipal Departments)
The Department of Education (DOE) permits school departments to report certain school related expenses incurred by other city departments on the annual End of Year Pupil and
Financial Report (EOYR.) These ‘indirect’ municipal expenses include administrative
services, employee benefits (including retirement and insurance), school facility operation and maintenance, other fixed costs, debt and capital outlay, and assessments
and tuitions paid to other districts. Many of these expenditures are counted toward the
annual net school spending requirement under M.G.L. Chapter 70.1. Under CMR 10.04, school districts may report municipal indirect expenditures on the End of Year Report, however, only when there is an agreement between municipal and school officials on the expenses to be allocated and method of allocation.

In addition, schools and city must follow Department of Education guidelines for allocating, reporting and documenting these expenditures.

Remember there is no direct “cash” paid to the school or deducted from the Operational budget for the following expenses.

Rather much like how the School Budget reflects the amount of items charged to the food service account for items the school dept. feels can be charged to that account, These expenses are what the City “charges” the Net School Spending Account for services rendered.

– Financial Accounting and Reporting: Other Municipal Departments

(a) Administrative Services. The cost of municipal accounting, auditing, central data processing, central purchasing, employee benefits administration and financial services provided to the school department.
GN: Between 2013 – 2015 the City charged the following based on the formula and agreement in place.

The following lines make it sound like the School Committee would have to vote on this yearly but I don’t recall since the initial agreement that they have done that. Maybe they only had to do it once.

The danger of not voting for it is the City can take out the police resources officers and school nurses or force the school committee to include that in their budget if they wanted them. There is also the cost of picking up trash, plowing the school parking lots and paying heat and electricity.

Here is the Report from 2011-2015 which as far has I can tell the School Committee has not requested the School Administration to update (The numbers should be included in the end of year report the School dept. files with DESE) it isn’t the responsibility of the City Manager to update the school committee it is the job of their Business Manager / Asst. Supt. of Finance to do so.

City of Lowell NSS (FY11 – FY15)

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