As a Board of Aldermen policy committee plans to investigate school budget deficits identified in the city auditor’s report, Shelton’s mayor did not rule out future legal action against the school board.
Aldermen President John Anglace announced the formation of the policy committee Monday, nearly two weeks after CPA David Cappilletti of Clermont and Associates, LLP, the city’s independent auditor, informed local leaders of a $3,170,300 accumulated loss in five special-revenue accounts maintained by the Board of Education and school district. These amounts have since been paid from city-side funds.
This new committee — consisting Lauretti, the finance director, the assistant finance director and the city treasurer — will plan to meet with the Board of Education, but Mayor Mark Lauretti offered only cautious optimism of reaching any resolution.
“This is a very different group than we have experienced in past,” said Lauretti about the present Board of Education and administration. “The committee was John’s recommendation. Normally I handle this through the budget process. But this group (the Board of Education and school Superintendent Dr. Chris Clouet) has a different mindset. Just look at the school bus contract. Why we wound up in court. They left $1 million on the table.”
Kate Kutash, chairperson of the Board of Education subcommittee on policy, an educator herself, welcomed the collaboration.
“We would be delighted to align our policies on communication with the city’s policies to enhance our relationships,” said Kutash. “We have always been ready to meet with city officials to work together in the best interests of the students and citizens of Shelton.”
Board of Education Chair Mark Holden said hoped for improved communications with City Hall, but added that the auditor’s report contained several errors which, when pointed out to the auditor, were largely ignored.
“The mayor and Aldermen are relying on false information when they make these claims,” said Holden. “We explained what they were in a letter to the accountant and he ignored it. We sent a follow-up and he responded he wouldn’t change it because it was a ‘matter of opinion.’ The relevant law is very clear. Professional standards say if he didn’t agree with us he should have a disinterested party review it. He didn’t.”
As it happens, according to Holden, the same auditor “got the things we complained about correct on a routine basis over at least 10 years. The law didn’t change.”
State Rep. Jason Perillo said state statute requires the city to hand over the excess cost funds to the Board of Education.
“The state funds are provided specifically for that purpose,” added Perillo, “and the fund is designed for these unanticipated costs which happen frequently in many school districts.”
When asked of the city could file suit — what would be the second in two years — against the school board, Lauretti said it remained a possibility.
“If they can’t be reasonable, we may have to go down that path again,” said Lauretti, adding that the city would file suit stating the Board of Education violated the town charter through its overspending the approved budget.
Lauretti said the Aldermen have experience in handling school budget requests and understand that boards of education often ask for more than they need.
“At the end of the day, if (the Board of Education) wants to scare people by saying lay off teachers, I say let’s say lay off the superintendent, the assistant superintendent,” said Lauretti. “I’m am going to be very direct with this superintendent. He has created this.”
The Board of Aldermen convened a special meeting on Feb. 7, during which it went immediately into executive session to discuss this matter.
After this session, the Board released the following statement: “We are in the process of reviewing the June 30, 2018 Audit of the City’s financials with our Auditors. They have identified five areas where the Board of Education has accumulated fund deficits. We are researching how these deficits happened and how to address them.”
“This will impact the fiscal year 2018-2019 budget, requiring immediate administrative oversight,” said Anglace, adding that that the city ended the previous fiscal year — 2017-18 — with a lower than expected operating surplus. However, there was no deficit.
“The city’s financial health remains strong,” said Anglace, but the Aldermen are forming the policy committee to research “how these deficits happened and how to address them.”
The biggest shortfall is for $2,776,708 in the state excess cost-grant program, is a fund used primarily to subsidize high-cost special ed programs. Much of its revenue gets reimbursed by the state, hence the name of the fund.
The remaining shortfalls are in special revenue account accumulated loss summer school, $14,470; educational grant funds, $85,889; the school lunch program, $178,394; and school rental program, $114,839.
Cappilletti did not suggest there was any wrongdoing on the part of the Board of Education or school district staff. Instead, the problem came about because of misunderstandings of the budgeting requirements, he said, and a lack of communication between the school district and City Hall.
Clouet has stated that the school the district sends a detailed letter to City Hall each year outlining any excess expenses.
“Neither the city nor its auditor — the same auditing firm that reviewed the Board of Education’s compliance with state of Connecticut excess-cost grant procedures in prior fiscal years, ever contested this process,” said Clouet in a prepared statement, “or the district’s legal right to the excess-cost funds.”
Clouet also said there are “serious errors” in the audit report. He said the error stems from how the district uses and accounts for state-issued excess-cost funds that help school districts deal with unanticipated special-ed costs. Such students, he said, typically “need complex services offered in out-of-district settings.”
“There is an implication in the report that the school district acted incorrectly,” said Clouet. “We have formally asked for a correction.”
That request came from the law firm that represents the Board of Education, Chinni & Meuser,LLC of Avon. The attorneys nonetheless said the Board of Ed’s finance staff were eager to meet with city officials to rectify the matter identified by the audit.
Anglace stated that the city’s “long standing method of SPED accounting is an acceptable accounting practice,” and the city and Board of Education “need to jointly address the underlying policy issues going forward.