AP NEWS

Lowell Schools Owe Over $2M in Improperly Charged Food Service Costs

August 24, 2018

LOWELL -- After months of district negotiations with the state over the results of a food services audit, the School Committee was informed Thursday night the district owes more than $2 million in improperly charged costs.

This revelation was possibly the largest in a meeting full of tough news about the district’s finances.

Billie Jo Turner, the district’s newly hired interim chief financial officer, presented her review of the budget to the School Committee, which found an over $1.6 million deficit in the budget -- a hole which exceeds the additional funding the district received since passing its budget this spring.

The School Committee did not hire back any positions, though expects to further discuss the budget next week as Turner continues her review. A $50,000 third-party audit of the budget approved by the School Committee, is also in progress, according to Mayor William Samaras.

Several members of the School Committee expressed concern regarding the information described in Turner’s report, including Jackie Doherty.

“The only feelings that are really involved here is the feeling of deep sadness to think about how much more debt we’re in than we thought we were in,” Doherty said. “We thought we (made) enough cuts, too much cuts, already and now we’re looking at line items that weren’t properly funded.”

Of the $1.6 million deficit, the food services account will have an estimated $498,675 negative impact to this year’s budget, according to Turner.

She said the issues with the food services budget are complex, because they involve both the fund’s revenue and expenses.

The audit conducted by the state Department of Elementary and Secondary Education focused on expenses charged to the fund in the 2016 to 2017 school year, which exceeded the roughly 11 percent cap on indirect costs mandated by the state.

The findings of the audit, means the district must reduce the expected offsets funded by this source from $1.59 million to $1.27 million -- a $323,821 impact to this year’s general fund, according to Turner.

The audit also affected the previous two years which found $1.1 million in fiscal year 2018 and $985,000 in fiscal year 2017 of unallowable indirect costs -- together totaling to over $2 million. Turner said these figures are estimates and not final.

This money will have to be paid back by the district’s general fund to the food services fund, meaning the money will stay in the district, she said. She said the state officials have indicated they will work with the Lowell Public Schools on a payment plan to try to eliminate any impact on students.

“They’re going to work with us, because they understand this should not impact our general fund and the students,” Turner said.

The fund’s “insufficient” revenue is related to a Community Eligibility Provision, or CEP, percentage.

District administrators say this percentage is meant to demonstrate student participation in dining at the schools and affects the funding the district receives from the state for this program.

For the budget funding the 2016 to 2017 school year, the district reported a CEP of 97 percent, but the state could not verify this level of participation resulting in a hit to the amount of funding the district received, according to Turner.

For last fiscal year, revenue was reduced by $379,000.

For this fiscal year, revenue was initially expected to be reduced by an additional $442,000, but Acting Superintendent Jeannine Durkin said the administrators met to address this issue this summer and resubmitted documents raising the CEP from 92 percent to 95 percent. Due to this resubmission, the hit to revenue is expected to be reduced, she said.

According to district administrators, the reduced CEP percentages are often the result of strict cross-checking with state records that require names of students on both lists to be exactly the same, down to the hyphens.

Turner said the food services account, which is a revolving fund, had $2.5 million as of June 30, 2015, but was within dollars, possibly cents, of being empty the same date this year.

“We had a cumulative problem the last two years,” she said. “Prior to that we had a healthy fund balance.”

Additionally, Turner said Lowell Public Schools recently found it has a $1.43 million unpaid bill, due to the district’s food services provider, Aramark, for April, May and June. She said she does not yet understand the impact of this bill, which may or may not need to come from this year’s budget.

In addition to the food services fund, Turner said she found deficits in the following areas:

* Use of Facilities offset: $110,000

* Telephone/ERATE: $125,000

* Unfunded Sick Leave Buy Back: $500,000

* Health Insurance offsets: $52,391

* Transportation: $266,000

* Miscellaneous: $183,000. This section, which is marked as “tentative” includes funding for grievances and bills forwarded from last year to this year, according to Turner’s report.

School Committee member Dominik Lay expressed skepticism at the findings and paraphrased a quote that five lawyers can come to five different conclusions.

Mayor Samaras rebutted his statement, arguing Turner’s report contained facts, not opinions.

This summer, several employees in the district’s administration have changed including former chief financial officer Gary Frisch, who departed for a similar position in Gloucester Public Schools in early July.

On July 18, the School Committee voted 4-3 to start the process of terminating Superintendent Salah Khelfaoui’s contract and place him on paid administrative leave. As part of this process, the School Committee is expected to send Khelfaoui a written notice of reasons for his termination.

Follow Elizabeth Dobbins on Twitter @ElizDobbins

AP RADIO
Update hourly