EAST MACHIAS – Reports that SAD 77 will run out of money by Feb. 15 are not accurate, but a preliminary 1999-2000 audit report indicates the district could be facing a cash-flow problem by the end of next month, the superintendent said Wednesday.

Superintendent Klaus-Peter Voss said auditor Ron Smith informed the SAD 77 school board of the potential problem during a Dec. 19 meeting.

Smith, of the firm Hulsey and Smith in Harrington, is auditing last year’s books. He hasn’t completed his audit, but was “very open” with the board, Voss said.

“If we don’t have a corrective action plan in place, we’re going to have a cash-flow problem,” Voss said. “We don’t have the details, yet, but if we don’t do anything, there’ll be one.”

But Voss said the school system may be able to avoid the shortfall in available revenues. Smith is working on the school system’s better use of existing accounts, he said.

“Right now, the monies are in no real interest-bearing accounts,” Voss said. “I was absolutely shocked when I saw the low interest rates we were getting.”

The superintendent said a report in a local paper indicating that Smith said the school system would be out of money by Feb. 15 is not correct.

“We’re talking about short-term borrowing – something to bridge a certain number of days before we get revenues,” he said.

Voss became superintendent of SAD 77 in November, taking over from interim Superintendent Omar Norton. Norton agreed to serve until the district found a superintendent to replace Ashley LeBlanc who resigned in June to become the superintendent for SAD 13.

Just before LeBlanc left SAD 77, residents of the four-town school district learned that the 1999-2000 school budget of $3.9 million was overspent by $250,000.

Despite questions about the overspending, voters in Cutler, East Machias, Machiasport and Whiting voted to give the district authority to borrow the $250,000.

But Voss said Wednesday that the amount the district needed to balance the 1999-2000 books was closer to $400,000.

When Norton deposited the $250,000, the bank took $100,000 off the top to repay an outstanding SAD 77 loan, he said.

So that $100,000 had to come out of this year’s budget, he said.

Norton had originally pegged the amount the district needed to balance the 1999-2000 books at more than $400,000 but the former auditors convinced him that the shortfall was closer to $250,000, Voss said.

SAD 77 board Chairman George Molinski Jr. said the board initially drew up a warrant asking voters to approve the district borrowing $425,000, but the auditor advised them to revise that figure to $250,000.

The $100,000 that came off the top was for a short-term loan, something the district frequently does in the spring until revenues come in, Molinski said.

Voss confirmed that Smith also alerted the board to a number of his preliminary 1999-2000 audit findings including: checks written without supporting documentation; checks cashed from the school lunch program which was already $30,000 overspent; checks written for cash with no documentation at a rate of two to four checks a month; checks written and signed by the same parties; warrants that went for payment with an insufficient number of signatures; 235 late fees paid to Machias Savings Bank and a resulting overdrawn account charge of $15 per day for an approximately two-month period; bank accounts that were opened without board knowledge; travel advances given without authorization; and the fact that the school system did not take advantage of e-rates for its computers, resulting in a loss of between $10,000 and $20,000 a year.

Voss said the residents of the district deserve and will receive a full accounting of the problems when Smith completes the audit. And the district has already addressed some of the problems Smith identified, Voss said.

Molinski said he is reserving comment until the audit is completed and Smith gives the board the supporting documentation and a specific amount of the potential cash flow problem.

Voss said Smith is proceeding “very carefully” and hopes to complete the audit by the end of February.