Deficit and delay perplex SAD 40 officials 5-town district seeks answers

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WARREN – How can a school district overspend its budget by nearly $500,000 and not know it until six months later?

SAD 40 directors were still scratching their heads last week, trying to figure out the answer.

One explanation given by some board members interviewed during the weekend: They must not have understood the reports given to them.

Another explanation: They may not have been working with accurate figures.

The blunder was discovered long after it should have been, they said, and directors from the five-town district (Warren, Washington, Union, Friendship and Waldoboro) say they are committed to correcting the deficiencies.

The dilemma came to light about two weeks ago, when Superintendent William Doughty informed the board that the district had overspent its fiscal year 2002 budget by $476,854 in the fiscal year that ended June 30. Because the district had some money in its accounts, the actual deficit is $392,525.

The district’s budget totals about $17.8 million.

The 2002 budget was supposed to have led to a $250,000 surplus that was to be carried over into the current year’s budget. It did not.

Les Murray, chairman of the finance committee, couldn’t be reached for comment.

On Saturday, Jay Feyler of Union, deputy chairman of the finance committee, said his best guess at why the district is in its financial predicament is: “We weren’t working with accurate figures the last few years.”

The board, however, will not really know what happened until it has another audit done to determine exactly where it stands financially, he said. On Wednesday, the finance committee is scheduled to meet with a representative of RHR Smith & Co. to discuss the fiscal year 2002 audit.

According to Feyler, the district’s finance office was “way behind” in paying some bills, and perhaps three additional months’ bills were paid for in the wrong fiscal year.

Larry Trueman of Waldoboro, another finance committee member, said he’s still not sure how the district got into such a situation. “It’s an interesting story,” he said Saturday.

When the committee reviewed line items in the monthly budget printouts, everything looked in order, he said.

In hindsight, Trueman said, perhaps he and other committee members either did not thoroughly understand what they were looking at or the budget was not explained to them properly. When there were deficits in a couple of line items, he said, the finance committee was told that money would be shifted to balance the budget, he said.

Regardless, “I know I’m responsible,” Trueman said. “It’s really my responsibility to ask the right questions.”

Blame has been cast on the superintendent by some, he said. Doughty should have informed the board earlier of the financial problems or asked for more staffing in the finance office, Trueman said. The superintendent is an employee of the board, but the board is ultimately responsible, he said.

“No matter what, I failed,” Trueman said.

“I think there’s a number of things going on,” director Shlomit Auciello of Warren said Sunday. “People really have to look at the costs that have risen beyond our expectations.”

Contracts for special needs services, electricity at the Warren Community School, and health insurance premiums are a “good-sized chunk” of the overexpenditures, she said.

“There was some sloppy handling of money,” she said, and with the board members being volunteers, they are not all financially savvy. Still, she said: “Just because I’m a volunteer doesn’t mean I’m not responsible.

“I’m not strong on this stuff. … That’s the mistake I made,” she said. Asked whether the finance office is adequately staffed or whether the district might consider hiring a business manager, Trueman said that with a $17 million to $18 million SAD 40 budget, “I think it behooves us to have one.”

Auciello agreed.

“We definitely have to reorganize that office,” she said.

The neighboring SAD 5 and SAD 50 districts have substantially smaller 2002-03 budgets, at $12.9 million and $9.9 million, respectively. In comparison, SAD 40 has a $17.8 million budget. Both SAD 5, which comprises Rockland, Owls Head and South Thomaston, and SAD 50, which comprises Thomaston, St. George and Cushing, have business managers in addition to superintendents.

Some years ago, SAD 40 also had a business manager. Current board members interviewed during the weekend couldn’t remember how long it has been since the district had a business manager.

SAD 40 directors also have suggested taking a closer look at the employee structure within the finance office. Last week, the board began interviewing independent auditors to review the fiscal year 2002 budget to see if another firm comes up with the same deficit as RHR Smith & Co. did.

On Thursday, the board also will begin hiring a new superintendent, in the wake of Doughty’s resignation effective in June. Earlier this month, Doughty resigned under pressure from the public and some board members for failing to ensure that the budget was balanced and for withholding information about the $476,854 deficit.

To make matters worse, the district is expecting to receive $118,000 less in state funding and perhaps $100,000 less in Medicaid reimbursement this year. And, the board has asked Doughty to trim $1.3 million from the 2003-04 preliminary budget, or 7 percent. The preliminary budget is $18.7 million. The board wants a zero percent increase in taxes next year.

Hiring a strong academic leader is important, Auciello said, but the board needs to decide before interviewing new superintendent candidates what it wants to do about financial leadership.