School deficit may be sent to DA for review

By Brock Parker, Town Correspondent

Arlington selectmen may seek an independent review by the Middlesex district attorney’s of a $1.5 million deficit in the school department’s budget that has surprised and angered high ranking town officials.

The officials, including the School Committee chairman, the town manager and selectmen, said they did not learn about the extent of the Fiscal Year 2010 deficit until August, more than a month after the conclusion of the fiscal year.

They say there is no indication that any misappropriation led to the shortfall, but they may invoke an infrequently-used law to ask the district attorney's office to track why Superintendent of Schools Kathleen Bodie took so long to report the deficit. The School Committee is also calling for an outside auditor to look into school department budgeting.

Officials are afraid the surprise deficit make it more difficult to convince voters that taxes should be raised to help balance budgets. They say bond rating agencies would want to see that proper budget reporting practices are in place.

Bodie said rising special education costs and a reduction in the amount of grant money contributed to the shortfall.

She said that although school officials knew all last school year that the budget would be tight and told town offcials that, the total deficit was not determined until August. The schools are now looking to improve budget tracking procedures, and reports will be given to the school committee monthly.

“It’s unfortunate that it happened, and no one wanted it to happen,” Bodie said.

The deficit comes after the school department has already been forced to make painful cuts for the new school year, including laying off all of the district’s traffic supervisors, cutting teacher positions and raising athletic fees. A special Town Meeting will now have to be held this fall, probably in November, so the town can cut another $1.5 million from the school department’s fiscal year 2011 budget to offset the fiscal year 2010 deficit, officials said.

But Bodie said cutting $1.5 million from the school budget will not require any further layoffs, because she said the town has identified savings for the new school year, and a Federal Jobs Bill announced in August is providing the town with about $491,000.

Town officials are angry, however, that the deficit was not reported sooner.

“There is no excuse for not knowing your financial position; there is just not an excuse,” said Selectwoman Annie LaCourt, who called the late announcement of the school department’s deficit a failure to manage and said Bodie “made a mistake.”

Town Manager Brian Sullivan said Friday that he suspects the town will report the deficit to the district attorney’s office. Sullivan said that although it does not appear there were any misappropriations that lead to the shortfall, state law requires that an over expenditure of a budget, such as the overspending in the school department, must be reported to the district attorney’s office.

“For what we can tell so far, I know that we’re not talking about a misappropriation of funds, but rather an over expenditure,” Sullivan said. “So, for the most part these were expenditures would have occurred anyway and we’d have to deal with them. It’s just not finding out the magnitude of it until the end of the year, doesn’t leave us with much to do to close that gap before the end of the year.”

Because of the deficit, the School Committee has called for an outside auditor or financial professional to review the school department’s budget, said Chairman Joseph Curro.

“This was actually a big surprise to us,” said Curro. “Clearly we’re looking at reconstructing a narrative of how this happened.”

Bodie said school officials knew late last year that the budget would be tight, and put a budget freeze in place. She said school officials were talking about revenue hits all year and school officials told the town’s Finance Committee in March that the budget was tight and the school department might need a reserve fund transfer.

In May, the school department requested $250,000 in reserve funds, but Bodie said the request was withdrawn after she discussed it with Town Manager Brian Sullivan and learned the town government needed reserve funds.

Finance Committee Chairman Al Tosti said that when the school department withdrew its reserve fund transfer, the finance committee thought the school department’s budget was ok.

So Tosti said the finance committee was surprised to hear of the deficit in August.

“This is unacceptable,” Tosti said. “A department head’s main job is to make sure they don’t overspend their budget. We’re upset with it. Everybody is upset.”

Selectmen will be discussing the deficit at the board’s meeting Sept. 13 and Chairwoman Diane Mahon said she’s requesting that the matter be referred to the district attorney’s office.

State law requires that the selectmen report overspending in the school budget to the district attorney’s office, town officials said, and Bodie said she does not consider a report to the district attorney’s office as “punitive.”

Bob Bliss, the spokesman for the state Department of Revenue, said the state statute, Massachusetts General Law Chapter 44 section 62, is used “infrequently.” Bliss said municipalities must balance their budgets under state law. Deficits aren’t uncommon, but when they do arise, Bliss said communities often use free cash or other resources to balance the budgets, or the money must come from the tax levy.

Curro said if an outside investigation from the district attorney’s office is required, the School Committee will cooperate.

Mahon said selectmen will also be discussing hiring an outside auditing firm to conduct a review.

Sullivan said one reason the town may want to bring in an auditing firm to review school budget procedures is to ensure that the town’s AAA bond rating is not affected by the school department’s deficit.

“I would expect this would not affect the town’s bond rating, but we clearly need to make sure that we have got the internal controls in place to ensure that it doesn’t happen again,” Sullivan said. “I’m sure anyone at the rating agencies would want confidence that that has happened.”

LaCourt said the school department’s deficit could also present a problem as the town considers putting a property tax override on the ballot next spring. LaCourt said winning support for an override could be difficult it the public does not feel that their tax dollars are being managed well.

“If they believe they are throwing that money down a dark hole, they are less willing to do it,” LaCourt said. “I’m hoping that we will win their confidence back.”

--brock.globe@gmail.com