BOE files ethics complaint against auditor

The Board of Education has filed an ethics complaint against the city’s independent auditor and his firm.

In the complaint filed Feb. 8 with the State Board of Accountancy, the Board of Education states that David Cappelletti, a CPA with Clermont & Associates, LLC, “violated generally accepted accounting and auditing standards” by refusing to reconsider what school officials call erroneous findings in the independent audit.

School Superintendent Dr. Chris Clouet said the district’s legal counsel sent a letter to Cappelletti on Jan. 17 stating that the administration “detected some incorrect conclusions in the audit report to the city and asked them to be changed.”

Clouet said the Board of Education received no response, prompting a second letter, dated Jan. 31, to Cappelletti asking for the same remedy, and again no formal response was provided. That has led to the ethics complaint “about what we believe is a lapse in ethical auditing,” added Clouet.

“We have been clearly following the law in relation to excess cost funds, which are exclusively for special needs students and costs for those students that are in excess of our “allocation,” said Clouet. “We’ve followed the law for many years, and that is well documented. We’ve been very above board here. With that said, we will be providing further documentation to the city following standard operating procedure as defined by Connecticut statutes.”

Cappelletti was scheduled to appear before the Board of Education Finance Committee on Feb. 20, but Clouet said he has since been removed from the agenda, and the superintendent does not know why.

Cappelletti reported his findings to the Board of Aldermen last month, stating that, in his opinion, the Board of Education accumulated a $3,170,300 loss in five special-revenue accounts maintained by the school district.

The biggest shortfall is for $2,776,708 in the state excess cost-grant program, which is a fund used to subsidize high-cost special education programs. Much of its revenue gets reimbursed by the state, hence the name of the fund.

The remaining shortfalls are in a special revenue account of accumulated loss, summer school, $14,470; educational grant funds, $85,889; the school lunch program, $178,394; and school rental program, $114,839.

Cappelletti did not suggest there was any wrongdoing on the part of the Board of Education or school district staff. Instead, he stated that the problem has arisen from misunderstandings of the budgeting requirements and a lack of communication between the school district and City Hall.

But Cappelletti did add a note in his report stating that “the general fund advanced $2,690,819 to the special education funds, which is expected to be repaid when funds are available.” School administrators state this is an incorrect understanding of the law and needs to be removed from the report.

“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, “or the district’s legal right to the excess-cost funds.”

Clouet also said the audit report contains “serious errors” which stem from how the district uses and accounts for state-issued excess-cost funds that help school districts deal with unanticipated special education costs. Such students, Clouet 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.”

School administrators have produced letters to city officials, dating back to 2008, that show the Board of Education has requested the excess cost funds in the same manner each year, and no claims, such as made in this year’s audit report, were ever made.

“The question I have is ‘Why now?’” said Clouet. “We’ve been doing it this way year after year after year. We’ve been using the money in strict accord with state regulations. The excess cost money goes right to paying the bills incurred by special needs students, and these can be easily viewed. Why now?”

As this debate over the audit continues, the Board of Education submitted its proposed 2019-20 fiscal year budget — which includes a 2.99% increase from the present year’s budget — to the mayor’s office Friday.

And that budget was submitted one day after a letter from Finance Director Paul Hiller to Clouet and Board of Education Chair Mark Holden stating that the administration’s “responsibility requires more than generic estimates of expenditures and cryptic lists of check runs.”

Hiller asked that the administration provide detailed explanations on changes in programs; estimates of all revenues and receipts to date and expected; itemized estimates of current and proposed expenditures; and any other details sought by the mayor and boards of Aldermen and Apportionment.

“Given the latest audit,” stated Hiller, “the clarity that the above will provide as to your current and anticipated budget is immediately needed and Charter mandated.”

Clouet said the budget as prepared and presented is quite clear, but the Board of Education has always made known that it would make any changes sought by the mayor or Board of Aldermen in clarifying its budget request.

Now, Clouet admitted it is a waiting game, with the mayor announcing his budget, including school figure, to the Board of Aldermen by March 22.

brian.gioiele@hearstmediact.com