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Food Service Repayment Plan to Hurt

November 13, 2018

Elizabeth Dobbins

edobbins@lowellsun.com

LOWELL -- The state accepted the school district’s four-year plan to repay $2.1 million of spending errors in the food service account, a process that will have long-term impacts on district finances, according to Interim Assistant Superintendent of Finance Billie Jo Turner.

“We will feel this for the next four years,” she told the School Committee Wednesday night.

The Department of Elementary and Secondary Education accepted the four-year plan starting next fiscal year. It will be paid via a reduction of indirect cost charges to the district account, according to Turner.

The annual reduction will be at least one-fourth of the total amount owed, though the district will increase this amount if financially able, Turner wrote to the state in an Oct. 18 letter.

In past years, the fund has been used to cover a number of indirect expenses including a portion of the superintendent’s salary, rental space for administrative offices, employee insurance, utilities, some IT department salaries and other administrator paychecks.

However, an audit of the account conducted by the state reviewing the 2016/17 school year found the amount the district charged to indirect costs was almost double the state approved amount.

The scheduled administrative review was conducted in Dec. 2017, according to Turner.

“Despite DESE concerns, transfers were still made by administration during FY 17/18 and the FY 18/19 budget was built with $1.5 million in offsets despite a depleted fund balance and unresolved findings with DESE on this issue,” Turner wrote in a memo presented to the School Committee.

The $2.1 million repayment requested by the state combines the impact of both the 2016/17 and 2017/18 school year.

In the 2016/17 year $1.53 million was charged to the account as indirect costs, about $986,000 over the allowed amount, according to Turner.

The following year, $1.73 million charged against the food service account. In a letter to DESE, Turner described this as $1.12 million over the state allowed amount.

In the current budget $1.6 million was expected to be charged to the account. Of this about $1.26 million is split almost evenly between indirect costs and costs the state has agreed to consider direct costs. This leaves about $330,000 leftover, which Turner wrote will be addressed in a revised budget.

Withdrawals from food service in recent years has left the account -- funded by food sales -- greatly reduced, according to Turner. In her budget review, the revolving account contained $2 million in 2015 and $2.2 million in 2016 before it plummeted to $216,916 in 2017.

As for this year, she reported the account would have negative $157,720 if the district paid all of its bills.

“Our memo (to the state) emphasized that the mid-year reductions we currently face will have a crippling effect already and delaying the repayment until next year will help us minimize the impact to student instruction,” she said.

Turner said the district may adjust the account’s purchasing schedule to a month-by-month basis instead of buying in bulk to avoid overdrawing the account.

School Committee members did not comment on the food service report at this week’s Wednesday night meeting.

In a review of the budget conducted by Turner earlier this year, she identified a net $2.48 million deficit, not including the food service account. This figure includes the $2.2 million in unbudgeted revenue the district has received this year through the state and other sources.

Reception of her review has been split on the committee, with members who supported Superintendent Salah Khelfaoui at the July vote to start his termination process suggesting inaccuracies.

Members who voted against the Superintendent have expressed concern regarding the district’s financial situation and its potential impact on the schools.

Follow Elizabeth Dobbins on Twitter @ElizDobbins

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