Amity District rocked by budget revelations

Amity District rocked by budget revelations
The Amity District grabs all the headlines and the news looked grim... on September 6, 2001...

By Sheila McCreven-Helfenbein, Correspondent
Orange Bulletin September 6, 2001 edition

As a financial crisis at Amity Regional District Number Five roils the community —vying for negative publicity with the announcement of recent air quality test results in back to back headlines — details of the two budgets in question suggest the breadth and reach of the school district's protracted litigation, and the ever-advancing cost of increasing student enrollment. 

While local Boards of Education, like those that run the K-6 grades in Bethany, Orange and Woodbridge, are obliged by law to keep their district budgets in the black, cannot engage in deficit spending, or roll a shortfall into the following year's budget without risk of personal financial liability, regional districts do not appear to be bound by these statutes.

The solution to the current Amity budget crunch may ultimately be decided in the political arena, if the ABOE resolves to ask its three member towns for additional funds to balance its books, either mid-year or during the formal budget process in the spring. 

On top of this formidable immediate financial challenge, the district continues to struggle with long-range planning to deal with overcrowding, the need for improvements to the deteriorating facilities at the two junior high campuses, and expansion of the senior high school — site of lawsuit-inspiring construction mere years ago. 

In addition, just this past June the district concluded a search process of over a year to name a new principal for the high school. Settling in to the job at the helm of Amity Senior High School at the end of July, Edward Goldstone welcomed 1,116 new and returning students to the Woodbridge campus on Tuesday.

As classes began this week the district administration and the Amity Board of Education (ABOE) are expected to be struggling with the task of drawing up a list of cuts to close the combined budget gap – totaling $1,938,584 – while students, staff, parents and community members brace for the impact.

The bombshell
Andrew Potochney, hired in June as Finance Director for the district, informed the ABOE at an August 27th meeting that the Amity budget for fiscal year 2000-01 showed a deficit of $1,186,708. The sudden appearance of red ink in the financial documents for the year that closed this past June was attributed by Potochney to a list of items running over budget (a total of $1,787,665), offset by some additional inflows from greater than expected grant revenue ($600,957).

According to a draft of Potochney's status report to the ABOE, dated August 23rd, expenditures that exceeded the budget in fiscal year 00-01 included:

• Expenditures in excess of budgeted amounts for legal and professional services, $787,179;

• Higher than anticipated tuition for special education students who require placement in schools outside the district, and the transportation to get them there, $261,000;

• An increase in the ServiceMaster contract for the repair, maintenance and cleaning of Amity facilities, $193,000;

• Other supplies (not including textbooks or library books and periodicals), $128,112;

• Additional teachers to handle rising enrollment, $120,651;

• Increased costs for utilities, $103,227;

• Increased communications costs, $103,057;

• New equipment, including required Universal Service Fund expenditures, $62,069;

• Plus miscellaneous smaller line item overruns and offsets from line items that came in under budget, netting out to an additional $29,370

In addition, Potochney informed the Board that it was his opinion that the current year's budget has been "understated" to the tune of $1,112,876, and should be revised to reflect information that has come to light since the annual budget process, as well as "computational errors" and adjustments in estimates and projections. However, Potochney also identified additional sources of revenue, including building grants and other state grants, totaling $361,000 – which could knock the overall shortfall for this fiscal year down to $751,876.

He also described the district's current cash flow situation, informing the Board that "payments to vendors have been delayed up to four months." He stated further that "This situation will not change until we have identified sources to cover the deficit for 2000-01 and the anticipated shortfall for 2001-02."

Potochney concludes that three options are available to the Board in dealing with the budget deficits:

1) Reduce the 2001-02 budget to absorb the 2000-01 deficit. It is observed that because discretionary funds in a school budget are limited, this option "would require reductions or elimination of programs" and is therefore deemed "unacceptable."

2) "Take no action at this time and anticipate significant legal settlements" that would balance the budget. But because the timing and outcome of any settlement is unknown, this option is deemed not feasible.

3) "Request additional funds from the three towns." While this would "probably result in controversy and adverse public reaction" it is described as the "the only solution that can resolve the situation." 

The ABOE reacts
In response to Potochney's budget news, the ABOE put together a list of eleven items under their consideration. Titled "Procedures to provide control over expenditures and to promote the flow of timely and reliable information to the Budget Committee and Board of Education" and dated August 29th, this list was delivered to the Selectmen with the bad news of the twin budget deficits. Included in this memo were the following self evaluations:

#2 "Institute a comprehensive policy to ensure that all purchases are properly authorized and recorded"

#4 "Establish a policy whereby any administrator, department head or committee recommending an expenditure that is not in the budget is required to identify the source of funds needed to cover the expenditure"

#8 "Develop a system which will integrate or eliminate our existing financial technology system"

#11 "Review and implement the recommendations of the Rusconi Report" (See box story for more on this report.)

The Selectmen 's turn
Stunned by both the budget news and the realization that checks and balances were obviously not in place to alert the towns that this situation was developing before it grew to such proportions, the three area First Selectmen gathered at Orange Town Hall on August 30th to make their displeasure known. Craig Stahl, re-elected First Selectman of Bethany this past May, Mitchell Goldblatt, campaigning for re-election as Orange First Selectman in November, and Amey Marrella, newly elected to the office of First Selectman in Woodbridge in May, jointly called for the resignation of Amity Superintendent Rolfe Wenner.

In their statement to the press, the three officials asserted that "As Superintendent, Dr. Wenner must be held accountable for the gross negligence that has befallen the Amity School System and especially its budgets for both 2000-01 and 2001-02 fiscal years." They noted that "Overspending has taken place unabated without control by the board or the administration." The Selectmen then called upon the ABOE to "recognize its fiduciary responsibility and provide a full accounting. The Board must explain how this gross overspending occurred and identify everyone responsible."

Finally, asking "How could they be so astronomically off the mark" in their estimate of the 2000-01 deficit when presenting their 2001-02 budget in May, the Selectmen implored the ABOE to provide "a response to this budget debacle, which does not compromise the quality of education of our children."

In subsequent statements to the press, Goldblatt has said he is giving serious consideration to asking the ABOE to relieve Wenner of his duties, and has examined his contract to identify grounds for dismissal. Goldblatt also discussed the possibility that the Selectmen would ask for the resignations of ABOE members. 

Marrella however stresses that she disagrees with these last points. "There was no discussion by the three of us about the ABOE" being asked to resign. "I don't think that's a good idea" she states, preferring instead to "work with the Board for the sake of the Amity system." She describes newly elected ABOE Chair Michael Lohne as "doing an excellent job in the past month." And after speaking with him on this issue, Marrella expressed her confidence that he will "work to correct the situation and make a full accounting" to town officials. 

While the ABOE's Budget Committee and its Financial Advisory Panel of town officials both met this week to explore options, the full ABOE will next take up the matter at their Regular Monthly Meeting, Monday, September 10th at 7:00 p.m. at the high school.

Rusconi Report offers insights

An Operational Review of the district conducted by RSM McGladrey, Inc. of New Haven, under the direction of Lawrence D. Rusconi, was completed in the fall of 2000. The consultants' charge was to review and evaluate the management and financial procedures and information systems in use in the Amity district offices. The review procedures included interviews with all administrative and financial personnel, as well as ABOE members and the Board's Legal Counsel. The Rusconi Report then assesses the effectiveness of the existing systems and offer recommendations for needed modifications.

In a draft version of this report dated October 31, 2000 the following is conveyed:

Organizational Analysis:
"The effectiveness of the Central Office is compromised by two factors relating to its organization and lines of communication. First, the organizational structure is excessively flat, in that there are too many individuals reporting directly to the Superintendent. Secondly, communications and interactions between the District Board (and its Committees) and the central Office staff are not coordinated and controlled in a manner that allows the Superintendent to execute and control management initiatives effectively and efficiently."

"As a result, in many cases, the day-to-day work of the Central Office staff members is largely directed through requests of Board members without any coordination through the Superintendent. While this practice evolved out of practicality and expediency, it is counterproductive and promotes confusion."

Financial Management Systems:
"The District currently relies on an assortment of five automated and manual systems for budgeting, accounting and financial reporting. These systems are not integrated..." 

 "Some of the consequences of this multiplicity of systems are as follows:

            • Inability to provide timely information to support decision making;

            • Increased likelihood of errors due to required manual interventions;"

Budgetary Control:
"While the District's purchase order system provides a level of budgetary control, in many cases these controls can be completely circumvented. It appears employees may order goods and services without a purchase requisition or a purchase order. The implications of this practice are significant. First, this practice could have an adverse effect on the District's ability to properly allocate and safeguard public assets by allowing individuals to commit District funds in excess of appropriations. Secondly, the District's financial systems do not readily reflect its current financial position, and therefore, managers are not afforded an important tool for managing their programs."

Procurement Procedures:
"The District has not established, documented and communicated an administrative system of reviewing and approving all requests for the purchase of goods and services. Budgetary controls are not being adequately maintained."

"Responsibility for managing significant contracted operations is not segregated from responsibility for authorizing purchases related to those operations."