School Board Changes Its Financial Reporting System

By John Voket

At its regular meeting September 7, the Board of Education, on a 5-2 vote, approved a change in its budget reporting practices to what is described as an “encumbrance based” system. The change was recommended by the board’s finance committee and employed during most of the last budget cycle and would obviate statutory requirements to discuss and approve transfers within its budget on an ongoing basis.

School board Vice Chair Kathryn Fetchick and member Debbie Leidlein opposed the measure, which would now only employ transfers in the event an error is discovered or a correction is required.

In making the motion, board member Lillian Bittman said the new practice would improve accessibility to financial information while making the month-to-month financial statements more clear to the board and the public, and would provide for improved year-to-year comparisons.

“This really was something the finance committee felt this would give us clarity, not just in how we look at it today, but when we go to next year and look backwards to get a year-to-year comparison,” Ms Bittman said.

Ms Fetchick said that state statute clearly outlines that transfers need to be presented for approval before they are made in the school budget, or immediately following emergency transfers that may be required by the school administration before they can be discussed by the Board of Education.

“When we’ve transferred in the past, it’s been hard to follow where the money is going,” Ms Bittman countered, adding that the former practice made it extremely difficult to do year-to-year tracking as well. “When we have our financial meetings we’re seeing what is encumbered, what is coming down the pike, so this board is still completely involved in the process.”

Chairman Bill Hart said the state mandate allows the board to define the accounts from which transfers are made to be identified as broadly as the board deems appropriate.

“There isn’t a requirement that we transfer at the micro level,” Mr Hart said. “Accounts go into the negative but the transfers are not at those microscopic levels.”

Ms Bittman said if the board does not see the pluses and minuses at year’s end, the board will not be able to budget accurately the following year. Ms Fetchick countered that by maintaining a system of reviewing and approving any transfers on an ongoing basis, the board can examine where money is coming from and going to in order to “see what we are giving up so we can fund another account.”

No More ‘Agita’

Ms Bittman said the school board has been subject to criticism that its transfer-based reporting system allows the board to hide money.

“By going to the encumbrance system, there are no transfers that allow us to hide money,” Ms Bittman said. “With this category, it’s ok to be under as long as the bottom line never falls negative — because that’s what we are accountable for.”

Ms Fetchick pointed out that under the new proposal, the entire school budget would simply be “one big pot of money, and we won’t know what we’re giving up.”

Board member David Nanavaty said that when the school board was providing the town Board of Finance with quarterly reports, “all we got was agita from the Board of Finance.” Once the Board of Education began providing monthly reports, Mr Nanavaty said the finance officials began asking questions about “micro” aspects of transfers in an attempt to track the spending.

“Now we don’t transfer, so it’s transparent,” Mr Nanavaty said. “Now the Board of Finance can look at the document and see what we’re spending in this area and that area — where we’re under budget, or over budget.”

Mr Nanavaty added that with the new system, the only transfers that might be required would be performed to balance out the “macro” aspects, or the pluses and minuses. That single transfer would occur at the end of each fiscal year, once the business manager presents the final year-end financial report.

District Business Manager Ronald Bienkowski said that circumstances occur each year within a fluid budget that cause deficits, particularly transportation and tuition costs. He said that his office produces reports that flag when any budget line exceeds or falls under five percent of what was originally budgeted.

Then, Mr Bienkowski said, if any budget lines fall below their balance, funds can be moved from over budgeted accounts administratively.

“You have to deal with this stuff from a macro level,” Mr Bienkowski said.

Macro Or Micromanaging?

Ms Leidlein said she is not interested in micromanaging the budget, “but I want to be sure I’m taking responsibility for the money we are spending. I really want to see where the money is being moved.”

Mr Nanavaty said the board can never really know what surpluses it will have until the end of each fiscal year.

“We delegate responsibility to the business manager to be sure the budget is balanced,” Mr Nanavaty said. “If there is a surplus, we make determinations as to how to spend it.”

Calling the question, Mr Hart, Mr Nanavaty, Ms Bittman, and Richard Gains voiced support for the measure, while Christopher Lagana initially said, “It doesn’t matter to me.” He was reminded by Ms Bittman that he was required to vote. Mr Lagana then replied, “Then I’m for it.”

Reached following the school board meeting, First Selectman Pat Llodra said she was not in favor of seeing the transfer-based reporting system scrapped.

“I like to see transfers come to a board prior to being made,” Mrs Llodra said. “It provides the elected representatives of the taxpayers the opportunity to make appropriate decisions.” The first selectman said that keeping tabs on ongoing transfer activities gives board members the best opportunity to perform budget oversight effectively.

“I want the transfer actions to be vetted,” Mrs Llodra said. “Saving any transfers to the end of the year absolves the Board of Education from their adjudication of those financials in process. This is the taxpayers’ money, and they have a right to know, even if it takes time.”

Mrs Llodra said that once the public develops confidence that a board is handling matters in their best interest, she feels taxpayers’ expectations to publicly examine the minutiae of budgeting processes will begin to lessen.

“Until then, they are going to want to be sure the public’s money is being used appropriately,” Mrs Llodra said.

Mr Bienkowski told The Bee following the vote, that on face, the budget documentation and its format on paper will be the same.

“My approach has been to only do transfers when you’re certain of the positives or negatives in certain accounts,” Mr Bienkowski said. “By eliminating transfers, which is the right thing to do, we can keep a better handle on where those positives and negatives are.”