We have concluded that School management intentionally withheld food service and general fund invoices during 2018 with the intent to charge the expenditures to the 2019 budget.
Sadly I was more correct than I ever wanted to be when I spoke about my concerns over the financial state of the school system when running for the School Committee. After 8 weeks in office finding out that the former administration submitted a budget without EVER INFORMING the last School Committee and my comments on the night I voted to dismiss the Supt especially with my concerns about the Food Service revolving account, all have been shown to be correct yet those of us who voted to dismiss still get criticized by his supporters.
The OUTSIDE INDEPENDENT Auditors in the yearly review of city finances left NO DOUBT and NO ROOM for DOUBT that the last Supt. and Asst. Supt of Finance had to go!
While Educationally Dr. K had some great visions and did accomplish some good things like enrolling in CEP that provides free breakfast and lunch to all students and getting a day school open, like his time in Winchendon he had no financial understanding nor ability to control finances in the school dept.
Current CFO Billie Jo Turner has developed a great working relationship with the City Finance team (Conner Baldwin- Heather Varney and Auditor Bryan Perry) and together they have worked to not only address the budget shortfalls but to put Safeguards in place to hopefully insure the School nor City find ourselves in the same financial mess that former administration left us in.
Hopefully his defenders like Bob Hoey, Dominick Lay, Andy Decouteaux, Paul Georges, Jim Peters and any one else who doubted or still doubt we were correct in dismissing him due to this financial fiasco that his administration left us in will read the letter in this weeks City Council Packet and realize without removing him, we were headed for worse financial times.
The City’s School Department has consistently had issues in meeting their net school spending.
As a result, the School Department should have implemented controls over the years to properly monitor and track their budgeted versus actual expenditures to help with the determination of net school spending, but also to assist in allowing the School’s finance team to monitor the budget and be able to identify situations that could occur causing the School to miss bill payments or overspend their overall budget.
During 2018 the Assistant Superintendent of Finance left the District at which time invoices were discovered that
should have been paid in fiscal 2018. This resulted in the School hiring a consulting firm to complete a forensic
review of School finances for the year ended June 30, 2018.
The forensic review report noted $1,431,206 of food service bills for April, May and June of 2018 that remained
unpaid and accrued at June 30, 2018. These bills would have caused the fund to go into a deficit position of
$776,000. There was also approximately $200,000 of invoices that relate to the School general fund operating
budget that were not recorded. This would have caused a budgetary deficit in the education line item of the City’s budget.
We have concluded that School management intentionally withheld food service and general fund invoices during
2018 with the intent to charge the expenditures to the 2019 budget.
The cumulative effect of the School Department intentionally hiding invoices ends with the general fund education
line and the food service fund being over expended at the end of 2018. The general fund education line is
approximately $214,000 overspent and the food service fund is in a deficit of approximately $776,000.
The consulting firm’s report also mentioned that the School Department has been charging inflated indirect costs
to the food service program. A similar situation occurred in 2016 and was highlighted in the City’s management
letter. The School continues to use inflated indirect cost allocations to charge budget items to the food service
program and has not had the indirect plan approved by the Massachusetts Department of Elementary and
Adjustments have been made to the City’s 2018 financial statements to properly record the invoices identified that relate to 2018. We believe the above constitutes a material weakness in the School’s system of internal controls.
We recommend that the City implement procedures to strengthen controls to provide reasonable assurances that
expenditures are properly reported in the City’s financial records and in the proper period. This would include a
process for the School Department to address any future operating deficits by implementing a budgetary plan to
reduce expenditures to amounts available to them through the general fund appropriation or other funding