School Dazed

Marblehead – In a scene more reminiscent of a court drama than a town finance meeting; last night Finance Committee Chairman, Ben Berman, wasted no time in putting the blame squarely on the shoulders of school management for illegally using FY ’19 funds to cover FY ’18 expenses; calling the funding fiasco “a fiscal and legal incompetence problem” in the schools.

The FINCOM explained the timeline of events leading up to the discovery of the illegal activity by new town Administrator during a budget meeting with School Officials last November

At that meeting school officials explained they covered the FY 18 deficit of $592,783 by changing the bill dates in the town accounting system so the invoices appeared as FY ’19 bills and were subsequently paid with FY ’19 funds; an activity that the independent auditing firm of Powers & Sullivan, reported last week violated Mass General Laws.

The independent auditing firm was immediately engaged by the town to examine the financial records in the School Department specifically related to Special Education (SPED) transactions, as only SPED invoices from the last quarter of the fiscal year were involved in the back-charging.

The Auditors Report, found that not only did the school violate the law, but also it cited the Town Finance Department for failing to find this illegal activity in their normal review process.

Town Financial Director, Alison Nieto, explained that this review is under the purview of the Assistant Financial Director. Nieto said that he explained it was his impression that this was a valid process for SPED charges when he was questioned in November about the illegal payments in July

Finding no such SPED exception to the general law, the Assistant Financial Director was suspended for at least one week without pay, and has since rejoined the Town’s financial team.

When it was time to hear from the School Department, the Superintendent, Maryann Perry, School Committee Chairman, Meredith Tedford, the school budget liaison / School Committee member, Jennifer Schaeffner, and School Business Manager, Amanda Maniaci, approached the table in front of the committee

Committee Chair, Tedford, began reading from a written statement where she argued that the schools had been “completely transparent” in their dealings with Town Finance and FINCOM, citing as evidence that while they did change the invoice dates in the accounting system; they did not back date the actual bills that were submitted to the town demonstrating, as she said, that they did not intend to cover up the transaction.

Tedford also said that they met numerous times telling the town leaders and the FINCOM that they faced unusually high mandated SPED expenses this year and that the town was unwilling to give them extra funds; at one point saying, “What did you expect us to do?”

The FINCOM chair responded that the school process was anything but transparent. He noted that yes, the schools were open about their deficit, but that the Schools said “they could handle it” and never asked for additional funding from the town.

He also said that it was his understanding that during the time that the schools were struggling to close the SPED deficit, the Superintendent was giving substantial raises to school personnel – a point that was later confirmed by the Town’s Financial Director, when she told the FINCOM raises in excess of 10% were given out to some school department individuals that year.

Superintendent Maryann Perry read from a prepared statement reiterating points in her written response to the Audit Report that everyone was made aware of what was going on and then refused to answer any other questions; leaving the School Committee Chair, FINCOM liaison, along with her Finance Director to answer the FINCOM’s follow up queries.

At this point it is not clear what happens next. The local District Attorney has been alerted of the illegal activity as is required by the law.

The town faces some uncertainty as to the financial impact of the back dating and the FINCOM indicated that the activity could decrease the town’s free cash by over 1 million dollars depending on how the State Department of Revenue directs that these abnormal transactions be handled.

It is also unclear what, if any, disciplinary actions the School Committee might take in response to the illegal activity in the organization of which they are ultimately responsible.