While the Manatee County school district isn't so cash strapped that the use of paper clips must be authorized in writing, fresh disclosures of budgeting failures are disconcerting. The latest findings are contained in an external audit performed by the certified public accounting firm Mauldin & Jenkins. The Herald obtained a draft of the report ahead of the March 25 school board meeting, at which time the final report is expected to be discussed.
We want to be positive here about a recovery from the depths of last year's $3.4 million budget deficit, but this lengthy external audit lists a litany of errors with some findings identified as a "significant deficiency." Under the budget heading, the draft states: "Therefore, we recommend that the district comply with State Board of Education rules and exercise sound fiscal management by maintaining a balanced budget."
Disturbing past practices
These are just three of draft's exclamation points:
n Who authorized the highly questionable and likely illegal payments for equipment leases from sales tax receipts specifically earmarked for capital projects? The district must refund almost $1 million to the capital budget for these expenditures on numerous copiers.
n The district violated federal tax regulations by paying principal and interest on debt out of Public Education Capital Outlay funds, the draft states. The total amounts to almost $730,000 that the report recommends be returned to the PECO funds or paid back to the state.
n In another egregious move, the rate the district charged for the workers compensation self-insurance fund covering custodians fell far short, leaving the fund with a net asset deficit of $2.4 million as of June 30, 2012. The audit recommends the district's general fund reimburse the fund $824,000.
Keep close eye on budget
To recover from the $3.4 million deficit disclosed last September, the district has frozen hiring, banned overtime and reduced general fund spending -- all prudent measures. January's forensic investigation report from Navigant Consulting Inc. blamed flawed budgeting software, lack of accounting for new programs and recurring costs -- even salaries. One of the worst oversights was the district's failure to examine the budget regularly -- and thus spotting problems before they multiplied.
The new external audit "strongly" recommends the district "perform timely detailed budget analyses throughout the 2012-2013 fiscal year to assess ... progress in attaining the budgeted fund balance as outlined in the fiscal recovery plan." That plan, approved by the state education commissioner last October, calls for a $6.6 million fund balance at the end of this fiscal year -- only a few months away.
On Monday, we'd like to hear an update on that progress. What is the current status of the budget? Is the district on track to meet the expected fund balance"
Senior administrators met with school principals recently to lay out some strategies for patching the budget hole. And desperate times call for desperate measures: Schools have been advised to rely on the money raised from bake sales, vending machines and athletic events to pay for after-school programs and extracurricular activities.
And our remark about paper clips was not far off the mark. Credit-card spending limits got slashed so spending on school supplies will be reduced -- and most purchases must be authorized.
The district's new superintendent, Rick Mills, takes charge this week, and we welcome his optimism and confidence about instituting sound budget planning and a long-range strategy for stability.
We also thank interim Superintendent David Gayler and Bill Vogel, who stepped in while Gayler took a vacation, for shepherding the district through this time of turmoil and leading the way on immediate ways to grapple with the deficit.
Earlier this month, the district's audit committee reported progress on a recovery by adopting Navigant's recommendations on correcting all the errors in the budgeting process. The new external audit indicates more must be accomplished.
The school system should never again be caught in such a monumental disaster and spring such shocking surprises on the community.