RSU 13 needs clean sweep
During the Jan. 9 meeting of the Regional School Unit 13 board, former Vice Chairman Brian Messing read a statement into the record concerning the present controversies in the district. His statement was provided to us in writing and is included in its entirety below:
Good evening. My name is Brian Messing, I live in Rockland. As the RSU formed, I was elected as the first vice-chair of the RSU board and was chair of the finance committee until I stepped down in late 2012. I believe that everyone on the board and in the public knows that I have always watched our finances closely and have not had an agenda to fulfill on the board. I listen carefully and make decisions after I have been presented with the facts. I probably have as good of an understanding of the expenses of the RSU as anyone, which is why I am speaking this evening.
Both SAD 5 and SAD 50 had undesignated or reserve funds that, by law, had to be returned to the townships. Nothing could be carried over to the new RSU. A total of $2.4 million was returned: $1.6 million of fully audited funds in July 2009, which offset the initial RSU budget, and an additional $800,000 in December of that year after the 2008/09 years had been audited.
As a result, the RSU started off with exactly $0 in reserve funds. As a fiscal conservative, I am interested in spending the dollars that we receive wisely, not excessively, and having emergency reserves from which we could draw if necessary. That outlook drove the finance committee to watch things closely.
The first year of the RSU had a budget of $28 million, which we underspent by $1.3 million. That is, we only needed 95 percent of that budget to operate the schools and at the end of the first year, we had $1.3 million in the bank.
The second year of the RSU we had a budget of $25 million, which we underspent by $800,000. For this year we only needed 97 percent of that budget to run every aspect of the school and at the end of the second year we had $2.1 million in the bank.
With two years of operation behind us, many uncertainties were resolved, we were getting better at estimating budgets and had reasonable reserves in the bank. Two years later, we should have been able to add even more to this amount.
I will come back to this in a moment.
Most of our employees, while they are on campus for only 10 months of the year, elect to have their pay spread over the full 12 months of the year. Their contracts begin in September and end the following August. Thus, while they have completed their contract work in mid-June, the RSU is obliged to pay the balance of their salaries over the summer.
An independent, outside auditor examines our finances each year, but the RSU has never received an "all clear" audit report, primarily because we still owe employees money at the end of the year. Auditors want to see the entire summer salary in the bank before the summer begins in order to give a clear audit report.
The finance committee recommended to the board that since we had been successful in controlling the costs of the RSU, that 20 percent of each year's underrun, if any, would be set aside and dedicated to accruing the summer salaries. This would have meant we would be in a position to get a clean audit report in about 5-8 years time, depending on how well we managed our annual finances. The board agreed to this, and the business office was directed to set aside 20 percent of each year's reserve until the full accrual was attained.
At that time, we were also seeing wild variations in fuel prices and were worried what would happen if we underpriced the per-gallon fuel costs during the budget process. The finance committee decided to recommend establishment of a voter-approved fuel reserve account. This account cannot be used for anything except fuel and only should there be an unexpected increase in the fuel price after the budget had been adopted. This fund was approved by the voters.
The paper before you is an accounting of the undesignated $2.1 million in savings from the first two years that the business manager included as part of the board's deliberations for developing the 2012/13 budget. The business manager informed us, as shown on the handout, that he was setting aside $381,000 to the summer accruals, and $200,000 for the fuel reserve. The auditor was informed that this had been done and the accrual at least, is mentioned in that year's audit report.
Unfortunately, what the board and auditor was told, was not true. Not only has no further money been set aside as directed by the board, but the $381,000 was never set aside and has been spent on something else after the audit was issued. Our reserve has been mostly spent by imprudent over-reliance on budget offsets and other unknowns. We have exactly $0 accrued for the summer salaries to pay the teachers four and a half years into the RSU. I'm willing to bet that no one on the present board knows this.
We were informed by the auditor in November's board meeting that there are significant problems with food services spending hundreds of thousands of dollars more than what they have been authorized by the board and taxpayers, a variety of posting errors, administrators signing checks payable to themselves, and many checks being cut to individuals within the district without documented evidence that the expenses were actually incurred. In fact the auditors have had to spend weeks, on top of the usual one to two days over the last month or so, in the business office trying to determine the true state of affairs of the RSU, and their final report had still not yet been released as of Tuesday.
This is a damning indictment of the financial management of the RSU, as auditors in general soft-pedal problems and try to couch them in the nicest of terms. This highlights a series of problems in the business office.
I can only talk to one of these issues that apparently began when I was the finance chair, that of food service. Our committee in fact began scrutinizing what was happening in the food service area for six or seven of the monthly meetings during the 2011/12 year. The board had established an $80,000 subsidy to cover losses in the food program from the first days of the RSU. Although we had hoped that food service would become self-sufficient based upon the professed expertise of the business manager, this never happened. To some extent, it was because the board decided to implement "healthy" menus for our kids. As a result, losses became larger, while a great deal of the food is thrown away since the kids don't like it. But I digress.
The monthly reports that we were getting in 2011/12 showed that we were running in the red about $3-4,000 each month, a little worse than the first two years. However, the business manager informed the committee for most of that year that it appeared that food services would only require half the $80,000 subsidy. A quick calculation shows that a loss of $4,000 times 10 months equals $40,000; about half the subsidy, which matched what we were being told. Suddenly, as we entered the budget cycle 2/3 of the way through the year, we were told that it looked like food services would in fact need the entire subsidy. Unfortunately, now that we were in the budget cycle, that is where the attention would be, no one had time to give the finance committee the rationale as to why the other $40,000 was needed.
But in fact, it wasn't $40,000, it was nearly four times this amount that was needed. Yet, no one on finance or the board for that matter was ever informed of this problem. Further, although this growing problem was now known to the business manager, who was responsible for preparing the 2012/13 budget, no mention was made of the issue during budgeting, and only the same $80,000 subsidy was budgeted for that year, when much more was actually needed. The deficit in this one area alone is now $350,000-$400,000 from what I understand. This is horrible business management.
The board is allowed to transfer a certain percentage of a given article to other articles. This is done at least once or twice each year to solve budget mismatches. I don't recall that such a transfer to food services has ever been done, and if not, over the last few years hundreds of thousands of dollars has been spent by the business manager in the food services area that neither the taxpayers nor board approved.
For the 2011/12 year, according to the figures provided by the business office and tracked monthly for the entire year, we were led to believe that we would also end the third year of the RSU with a healthy surplus. It turns out that the auditors report that the RSU actually overspent the overall budget. That is, we spent more than the taxpayers authorized us to spend. Similar projections from the business office showed an undesignated fund balance of $1.4 million of which $938,000 was relied upon to offset this year's budget. We now find from the auditors instead of $1.4 million, we only had $700,000-$800,000. I would like to know how there can be such a mismatch from reality.
Apparently, problems identified by the auditors in 2011/12 were not corrected, many of the same problems still exist and the funding problems in food services was even worse for the 2012/13 year.
All of these issues and the many others cited by the auditors pre-dated the arrival of the current superintendent and/or were solely under the purview of the business manager who is responsible for establishing accounts, making payments, and for the last two years creating the budgets.
Running a district the size of ours is difficult, I grant you, but the myriad of mistakes made in the audits, as well as what I and other board members have found during the budget process, and the apparent mismanagement in the areas identified by the auditors do not indicate competency in the business office. I do not know where or who is responsible for many of these problems. I was a proponent of bringing the business manager into the RSU, but a change in the business office is now indicated. We certainly cannot continue as we have.
The blind allegiance to the current business manager expressed by some of the administrators and staff, alluded to in several letters to the public, published well before and since facts have come to light, is disappointing to say the least. I can only guess as to why some might spout off when they have no idea what ground truth is. There is a right and wrong way to address concerns. What has happened in this district is the wrong way and borders on insubordination, if not having crossed that line.
As a result of the recent events, the finance committee last week was informed that the taxpayers of the RSU are looking at an approximate $1.8 to $2 million increase in local funding for the upcoming year to keep the status quo. This will be an aggregate increase of about 8 percent to the townships, with Rockland and other towns bearing double digit increases.
I'm sure many of you read Arvilla Collins letter to the editor a month ago. Arvilla is a long-time member of the community both in the schools and on the board. She was right on the money in her analysis. She stated that the current superintendent has been most transparent, has brought everything before the board and done everything that the board directed him to do. Unfortunately, the board appears to be fatally divided. And it is clear who has not supported him since he took the job. She took the board to task as I am this evening.
When the board votes to have the superintendent do something, that is supposed to be the end of it. Move on to the next topic. Heaven know that I was on the losing end of many votes. But I accepted the decision of the majority. What seems to be happening is that those on the losing end of a vote immediately begin a campaign to undermine that vote rather than accepting it. In particular, board members should not be conspiring to meddle in RSU affairs at anything other than the board level. The incredible number of secret, private conversations coordinating the removal of this superintendent and efforts to manipulate the public to agree with them is disgusting. And trust me, this has been happening since the moment the superintendent was selected to fill the position. Those of you involved in this campaign should be ashamed of yourselves.
With the imminent departure of the superintendent, it is time to do a full sweep of RSU management. A new business manager is needed, and I concur with the recommendations made at the last finance meeting to eliminate additional administration, this is long overdue. This would at least reduce the $2 million in additional local taxpayer money to something that, while still offensive, is more attainable, I think a number of board members should also resign since they are doing everything that is opposed to MSMA suggestions as to how to behave. And everyone, both within and without the RSU needs to learn the meaning of civility.