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ANeSU rethinks budgeting process after big error

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Posted on February 3, 2011 |
By Tamara Hilmes



BRISTOL — Addison Northeast Supervisory Union officials are trying to explain why, for the second year in row, a six-figure deficit has showed up on the school districts books six months after the close of the fiscal year.

At Tuesday’s meeting of the Mount Abraham Union High School board, chairman Lanny Smith and Superintendent Evelyn Howard said district business manager Greg Burdick had made projections last June that poorly estimated Mount Abe’s revenues and expenditures for the 2009-2010 fiscal year.

The miscalculation resulted in an unexpected $241,000 deficit at Mount Abe — the same type of error that led to a $450,000 deficit across the entire ANeSU during last year’s budget development process.

Smith called it a “big accounting mess-up,” and said Burdick, who wasn’t at Tuesday’s meeting, had resigned from his post on Jan. 19.

School board members were unaware of the inaccuracies in the books that predicted a surplus of $130,000 until the final audit report arrived in the supervisory union’s business office in December, showing a deficit of $111,000. In addition to missing the “Challenges for Change” 2 percent reduction in spending that they had hoped to meet, board members and school administrators have made additional cuts to the proposed 2010-2011 spending plan to account for the inaccurate projections that the original spending plan had been based on.

Both Smith and Howard pointed their fingers at a flawed projections process as the source of both this year’s and last year’s errors.

“What happened this year, as happened last year, is that at the end of June, our business manager made a projection as to where our budgets were going to be — what the expenditures were, what the amount of income was,” Smith said at Tuesday’s Mount Abe school board meeting. “At the end of June, he projected that we had a $130,000 surplus.

Throughout the summer, he was out with a surgery and when he got back, he was asked to update and he did not update the lack of federal funding.”

According to Smith a “lot of federal funding fell short and we did not get the money we thought we were going to get.” In addition to losing out on revenue that had been included in the 2009-2010 spending plan; the school also saw a number of expenditures that the school was not prepared to absorb.

“There was a lack of money coming in and more money spent,” Smith said. “Added together, that combined to give us a $241,000 deficit. It was the same structure that happened last year. Money isn’t missing, it’s a bad projection and money didn’t come in that we thought would be coming in.”

In an interview Wednesday, Burdick said, “My projections didn’t contribute to the deficit. They were off $241,000. I made a bad projection and the change in the number was $241,000.”

Burdick will no longer be employed as business manager for the supervisory union after next month’s town meeting, a position that he has held since the summer of 2006.

“Greg Burdick has submitted his resignation and will no longer be employed by the school district anymore because of this,” Smith said. “We’re working to hire a consultant to help us figure out what is going on that’s causing this to happen over and over again and make sure that it never happens again.”

Though the poorly executed projects and the resulting $241,000 deficit were brought to the supervisory union’s attention in December, Howard, who has served as superintendent since 2000, did not explain the error to the board until Tuesday’s meeting, an explanation that community members had been demanding since a Jan. 4 school board meeting.

Howard passed around a memo that highlighted the problems she identified both in the projections and in the process that was used to determine them.

“The accountant usually closes the books in July,” Howard said, referring to ANeSU accountant Elizabeth Atkins. “She was not available to do that.”

Howard explained that the accountant was out on medical leave during the summer months, which delayed the budget development process.

“The independent auditor was scheduled to be in the offices in August and because the accountant was on medical leave, we had to delay that,” she said. “And then the budget drafts were needed and at that point in time, one of the pieces of information that’s needed in putting together some of the budgets is how the last fiscal year closed. So we did begin that process, but we were using what was produced in June as a projected fund balance.”

According to Howard, the process became backed up, and in October, when Addison Northeast administrators and Mount Abe board members would have normally been looking at the auditor’s drafts, there was nothing to review or adjust.

“Unfortunately, we didn’t get that information, or it didn’t get included until the audit report arrived in the business office in December,” she said. “So that basically was a delay in verifying the fund balance. Once we had the auditor’s verification, then we were able to actually move on and make adjustments.”

According to ANeSU board member Donny Sargent, also a member of the executive committee, board members rely on estimates and drafts provided by the supervisory union office in order to make decisions on how the board should shape school spending, and on what programs and expenses should be cut.

“We basically took a look at stuff at every meeting to see where we’re at,” Sargent said. “To be honest, we really depend on the superintendent’s office to get this right. We’re just volunteers and this is a full-time job for those guys. It’s hard for us to make educated decisions without information and we really lean on those guys to get those numbers correct.”

Sargent noted that it was not until the Jan. 19 meeting that the executive committee was told that the recent $241,000 accounting mistake was the same mistake that let to the $450,000 deficit last year.

“We’re concerned about it happening again,” Sargent said.

According to Sargent, the wide-open parameters of the business manager’s job description contributed to both accounting mistakes, and that Burdick simply had too much on his plate.

Mount Abe board member Dick Merrill of Bristol also echoed this sentiment, saying that the errors were not made as a result of a “people problem.”

“The processes that we have down there, in my opinion, stink,” he said at Tuesday’s meeting. “And that’s what I’ve been complaining about for five years. And this is what I’m being promised that is going to be fixed. We’re going to bring a consultant in, and we may have to buy some more software. It’s not a people problem — it’s a process problem. And it’s been going on for five years. If you look at audits for the last five years, it’s terrible. It’s absolutely terrible … we need to hire somebody to do the job that the business manager was doing when he should have been taking care of his own office. I’m satisfied that there’s no money missing, and that it’s just a mis-estimation of what the revenues and expenses were going to be.”

Both Howard and Smith emphasized that measures will be taken to prevent similar errors in the future. Along with a new business manager, a consultant will be hired to analyze the process currently used by the supervisory union to develop its projections and spending plans.

“There is no suggestion or concern about anything missing or lost,” Howard said. “This is simply a matter of having projections in June that were not helpful and we’re just taking it apart, piece by piece, to see what kinds of things might have contributed to this so that we can design better systems.”

One piece of the process that Howard recognized as flawed is the way in which certain expenses are encumbered, or held up from being figured into the budget, throughout the year. Overspending, she said, was the result of insurance and benefit fees not being factored in, along with substitute teacher fees. According to Howard, these expenses were not “visible to department heads” who then continued, unknowingly, to spend their budgets, which had already dried up.

“Well, who were they visible to?” asked a man in the visitors’ section at the Tuesday meeting. “Somebody wasn’t watching the store down there, then.”

“That’s why we’re going through this process,” Howard responded.

Tamara Hilmes is at tamarah@addisonindependent.com.

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