Ansonia city, school district close in on settlement
ANSONIA — The Board of Aldermen is expected to consider a proposed settlement that will add $850,000 to the Board of Education’s 2018-19 budget and end both a lawsuit filed in Superior Court and a state Board of Education investigation.
The Aldermen called a special meeting for Monday to consider the proposal in executive session. The Board of Education is expected to consider the proposal at or before its regularly scheduled Feb. 13 meeting.
If approved, the settlement will add $800,000 to the 2019-20 school budget rather than a requested $6 million budget increase.
Sources Monday night could not say where the additional funding would come from. The amount is comparable to a one-mill tax increase.
The proposed settlement comes after two days of mediation before retired Superior Court Judge Robert Holzberg, now employed by the law firm of Pullman and Comley, and is contained in a joint statement drafted by Mayor David Cassetti and Superintendent of Schools Carol Merlone.
The proposal requires the school board to sign a letter authorizing the city’s insurance broker to analyze claims information to evaluate insurance costs and options.
It also requires the school board to provide the city with budgetary and financial information as well as implement a shared modern financial platform to replace their current software.
The requirement for an insurance evaluation is in response to an independent auditor’s finding that the school board overspent its 2017-18 budget by $225,694, mostly because it underestimated its self insurance expenses.”
The 2017-18 school year was the first year the board was self-insured.
The audit also said the school district did not use “generally accepted accounting principles” and pointed to what he termed a breakdown in sharing information between the city and school district.
Auditor John Accavallo, a principal with MWAC, a certified public accounting and consulting firm with a Shelton office, also said the city found a deleted entry in the school board’s books totaling $108,492 in insurance expenditures which were improperly classified as a liability.
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 totaling $97,526 for claims incurred but not reported for self-insurance and to reclassify $108,492 in insurance expenditures that were improperly classified as 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.”
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.
Accavallo said the audit also 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 lunch program also understated the amount of cash and accounts payable at the end of the June 30, 2018, fiscal year, the audit found.
Accavallo said checks totaling $102,565 were written, held and not paid out until July or August when the fiscal year ended June 30. He recommended bills be paid immediately.
While litigation is pending, Accavallo recommended the school board issue purchase orders only for 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 board now has to write a corrective action plan to which the city can respond. The plan will be sent to the state Office of Policy Management for review, Accavallo said.
Rancor between the city and school district escalated when the Board of Aldermen removed $600,000 from the school board’s 2017-18 budget last year, money it initially added when state aid funding was held up by a late budget.
When state aid came in higher than expected — but less than the district had asked for — the Aldermen pulled back the $600,000 citing the increased funding the school board received from the state.
The school board maintained such a reduction was illegal under the state’s Minimum Budget Requirement law and sued the city.
The state Board of Education then began an investigation after receiving citizens’ complaints.
Last June, while the suit was pending and the school board sought a temporary emergency order, the Aldermen agreed to set up a $500,000 contingency fund which the Board of Education could spend only on specific items like payroll, insurance and textbooks.
Then earlier this month, the school board passed $37.8 million budget for the 2019-20 school year — some $6 million more than the current $31.26 budget.
Such a budget would require nearly an 8 mill rate increase in taxes and if approved, would be included in every school board budget going forward.
Mayor David Cassetti has said approval of the $37.8 million spending plan was “not going to happen.”