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Audit puts Ansonia school board, city further at odds

January 13, 2019

ANSONIA — The city’s school board overspent its 2017-18 budget by $225,694, according to an independent audit which chided members for not following accounting principles and failing to share information with the city.

Carol Merlone, the longtime superintendent of schools, announced last week that she is retiring as of June 30 and is considering entering politics.

Moments before her announcement, the school board authorized Merlone to seek $20,000 to begin securing funding for a new $37 million middle school to be built on Ansonia High School’s Pulaski Highway property.

The school board has also proposed a $37.8 million budget — approximately $6 million more than current funding. Approving it would require the Board of Aldermen to pass a 7-mill increase in Ansonia’s tax rate.

All this comes as lawyers for the city of Ansonia and the city and state boards of education met Friday with a judge to discuss the possible settlement of lawsuit over the Aldermen’s removal of $600,000 from the schools’ 2017-18 budget.

On Tuesday night, John Accavallo, a principle with MAWC, a certified public accounting and consulting firm, advised the aldermen that the school board overspent its 2017-18 budget by $225,694, primarily because of underestimated insurance costs.

Over budget

That expenditure went beyond the board’s original $31.86 million budget as well as the $31.26 million budget effective after the aldermen pulled out $600,000.

“The bottom line is, they went over budget,” said John P. Marini, the city’s corporation counsel. “These are unauthorized costs that have to be approved by the aldermen. This is a management problem, and under the law the school board members can be held personally liable.”

Chris Phipps, who sits on the school board’s Finance Committee, disagreed.

“The law requires it be willful and malicious before such a finding is ordered,” he said about personal liability. “This wasn’t malicious or willful. We got hit with a large bill after the end of the fiscal year.”

Phipps said the board is due approximately $181,000 from its insurance program.

But it wasn’t just the overspending Accavallo saw. He said the audit uncovered three other deficiencies in the school board’s management.

The audit found a deficiency in the city’s grant and capital project fund that involved failing to record two entries totaling nearly $1.2 million in the accounts payable section of the grant fund and capital project fund.

The school board now has to write a corrective action plan, to which the city can respond. It will be sent to the state Office of Policy Management for review, Accavallo said.

Adding up errors

The audit found four deficiencies in the school board’s reporting procedures:

The Board of Education spent more than allowed by its budget.

While litigation is pending, the auditor recommended the school board issue purchase orders only to the extent of the appropriate budgeted amounts. If more monies are needed, the audit advises that the school board either transfer them from unexpended accounts or seek an increase from the Board of Aldermen.

The school lunch program understated the amount of cash and accounts payable at the end of the June 30, 2018 fiscal year. Accavallo said checks totaling $102,565 were written, held and not paid out until July or August when the fiscal year ended June 30.

“We recommend that once checks are written and signed they be mailed immediately,” the audit report states.

The school lunch program does not timely repay the Board of Education for wages and payroll taxes incurred. The auditor said the Board of Education pays the initial expenses and is then reimbursed.

Accavallo suggested the school lunch program only keep two and a half months of operating expenses in its cash accounts. Having more than that is unnecessary because the program gets reimbursed from federal and state governments, he said.

The Board of Education’s detail ledger and the city’s general ledger did not reconcile until Dec. 30 for the fiscal year ending June 30. Adjustments were needed in the amount of $97,526 to record claims incurred but not reported for self-insurance and to reclassify $108,492 in insurance expenditures that were improperly classified a a liability.

At one point the $108,492 was deleted from the budget and then discovered by the city.

That angered Domenic Filipone, a 3rd Ward alderman.

“I work for a bank,” Filipone said. “If I were to delete a transaction I’d be fired immediately.”

However Richard Bshara, the retiring city finance director, who caught error believes it was “just an error... there wasn’t anything malicious.”

Once the $600,000 was removed in March from the school board’s budget, communication abruptly stopped. Accavallo recommended both the city and the school board form subcommittees to share budgetary information.

“We’re willing to do that,” said William Nimons, the school board chairman. “But at our convenience not theirs.”

As for the School Board’s requested $6 million increase in their 2019-20 budget, which, if approved, would be included in every school board budget going forward, Marini called it “unprecedented...particularly when the auditor has shown they can’t manage their budget.”

Mayor David Cassetti, who is opposed to raising taxes, said, “it’s not going to happen.”

“This request of a 20 percent increase is irrational and financially irresponsible,” added Lorie Vaccaro, the Board of Alderman president. “The city and the Board of Education have to face reality and work together. Taxpayers want a reasonable, well thought-out and affordable budget.”

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