Bethel School Deficit Explained

Front Page / Apr. 22, 2010 1:49pm EDT

By Amy Danley-White

A perfect example of multiple systems failure leading to disaster was brought to light at the Bethel School Board’s April 19 meeting.

Norman Andrews, the business consultant recently hired for Bethel schools, led a question and answer period on how the school racked up a $480,000 deficit and how to avoid it happening again in the future.

John Poljacik, principal of Whitcomb and Rochester High Schools and interim superintendent, introduced Andrews, hired in the fall of 2009 to help the school with its finances during the auditing process.

Andrews explained that the deficit occurred because the Bethel School had for years fallen short of paying back its line of credit. Since 2003, this has resulted in $480,000, accumulating with interest that the school now has to pay back in three years.

Before turning over the meeting to Andrews, Poljacik announced that Andrews would be working with the school for several weeks more and that Richard Stewart had been hired as the new business manager.

Andrews started the meeting by saying that when he was hired in the fall, “I didn’t discover the deficits. They had always been here. They have been recorded, on an annual basis by the accounting firm hired to perform the audit.”

Andrews explained that the budget is just a plan and over the course of a school year, there may be unexpected expenditures incurred.

“The budgeting process should ideally start in September and by November, there should be a draft to take action on,” he said. Ideally, a school audit should be finished in time for town meeting.

He said he didn’t think there had been a budget committee, noting “Budgets have been prepared from budget, to budget, to budget without looking at what the actual expenditures were compared to what was budgeted.”

Andrews and Poljacik went back to actual expenditures for 2008 and 2009. Then for building the 2011 budget, they started from “ground zero” to build a realistic budget.

Andrews explained the way the school board’s relationship to the school’s budget and expenditures should be.

“All bills come into the accounting department and get entered on to a warrant, which is a list of bills to be paid,” he said. “The school board, which makes sure the bills are appropriate, approves the warrant and then the warrant goes to the treasurer to be paid. I think it did used to happen here, but it doesn’t any more. Now board members may not actually see the bills before they give them approval to be paid. The Vermont statue says that bills can only be paid after approval by the board. If the bills don’t go to the board to begin with, then it is impossible for them to do that.”

“Over time, there has been a lack of leadership,” Andrews said. “One thing I will say in defense of the board, it is hard to get board members to come in and review these things. It is frustrating to put together these warrants. Schools have to pay bills twice a month, school boards meet once a month. Board members hold outside jobs and lead busy lives. In defense of the system, best practices fall by the wayside.”

Public Comment

Audience members expressed frustration that the budget was not being adhered to and that checks to pay these bills are not approved by the school board. They wanted to know who did authorize expenses and why, if the audit was too late for one year, it didn’t show up for voter approval in the next year’s town meeting.

“Lines of credit are used to support peaks and valleys in cash flow,” Andrews explained. “There is money that we get from the state that comes from the education support grant three or four times a year. Most school districts function with a line of credit. School boards establish the amounts of this line of credit. The boards sign the notes.

“Generally, it is the school boards who authorize draws on lines of credit to pay bills. However, many districts authorize the treasurer to authorize the line of credit because payroll and expenditure dates don’t always line up with school board meeting dates.”

Andrew dispelled the story that an audit hadn’t been done for years.

“Every year an audit has been done. The board has not afforded itself a reviewing of that audit. The ultimate responsibility is held with the board. I’m not pointing any fingers (to the current board). A lot of people have come in gone in the last few years.

“Beyond that, there has been a lack of leadership. There have been four or five business managers who have cycled though this district in the last five years, some of whom did not have the experience (for the position).”

Andrews noted that, “When I arrived here in September, I found a box in the business office with audits from the last two or three years that had never been opened. Each one of those audits showed the deficit compounded as it went along.”

He said there was no missing money, just money that had been borrowed on a line of credit that didn’t get paid back before the interest was due. He said he stopped his budget review at 2003 and with the $96,000 deficit.

“According to Vermont Statute, you have to include the deficit in next year’s budget. We didn’t deal with these deficits appropriately based on the statutes.”

Andrews said there was no one person responsible but ultimately the school board as a whole should catch and fix these mistakes.

Poljacik said he would make sure the board members understand what their roles and responsibilities are. He also warned that even when a school district is operating under best practices, there are often deficits.

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