An ongoing internal school district accounting review has determined that there are “a couple of accounts with excess funds” that should have been returned to the towns.
District Business Manager John Stanbrook reviewed the district’s use of Circuit Breaker funds in depth during his financial and budget report to the School Committee on Wednesday, Nov. 17.
Stanbrook said Circuit Breaker has been used as a revenue source in the general fund. This year there is $600,000 as a transfer from Circuit Breaker as a revenue source. He said he counted the uniform Massachusetts accounting system process through which the Department of Revenue said the district should be showing a Circuit Breaker.
“It shouldn’t be shown as a revenue source in the general fund and an expenditure in the general fund,” Stanbrook said. “It should be shown just as a reduction to the expenditures in the general fund.”
Stanbrook said as of the fiscal 2023 budget, the committee would see a line item reflecting some type of transfer from Circuit Breaker showing zero — which means expenditures would be reduced by the amount, instead of showing it as revenue.
Committee member Fred Small asked if the process could accurately be described as the district spending up to threshold and then spending Circuit Breaker money.
“Is that not what has been happening?” he asked.
Small outlined a hypothetical to illustrate his question on a $98,000 expenditure. He asked if the first $48,000 is the responsibility of the district, with the other $50,000 being a reimbursement formula known as a 75-25 split — for every dollar the district spends, it received 75 cents in Circuit Breaker funds.
“What I’m talking about here is only to show what we do when we get the actual money from the state,” Stanbrook said. “I think we’re talking about two different things. … After doing the reimbursement rate allocation [the question is] what do you do with that money?”
Superintendent of Schools Jeff Szymaniak said the district has historically been using Circuit Breaker to offset the budget.
“That’s not the appropriate way to do it because you’re just taking money and putting it as a revenue source,” he said. “Circuit Breaker money should be allocated to a direct special education expense.”
The funds are to be used for expenses such as funding a mid-year out-of-district placement, for example.
Small asked if the district’s past approach has any impact on anything else in the budget over the years and whether money was carried over that shouldn’t have been.
Stanbrook said he didn’t know about past impact, but said it should have a net zero effect. Carry-over is only permitted for one year, he added.
Up to fiscal 2019, there was only a small amount carried over and there is a “small amount of reimbursement in there right now.”
Small also asked if funds were spent out of the general fund that qualified as Circuit Breaker money and, if so, did it end up in excess and deficiency.
“That’s what would happen if we didn’t spend it,” Stanbrook said. “Have we spent every dollar of Circuit Breaker? No we have not.”
Committee Chairman Christopher Howard said previous meeting recordings could be checked to verify it, but said he recalled that unused Circuit Breaker funds were applied to the budget, but it was not used as an all-purpose fund.
Last year’s Circuit Breaker reimbursement was about $1.3 million, according to Stanbrook.
“That’s a pretty healthy number,” Howard said, noting that some districts have a Special Education Stabilization Fund to help offset costs.
“If we’re holding general funds and we’re holding Circuit Breaker monies that could be spent instead of general funds — if we had spent the Circuit Breaker money, we would have had additional funds from the general fund — we could have had, perhaps, programs, etc.,” Small said.
“I don’t know if we’ve managed Circuit Breaker well over the years,” Szymaniak agreed, but he is uncertain the past numbers are readily available and that Stanbrook is looking at ways to do it better.
Committee member Dawn Byers said she was concerned about whether the way Circuit Breaker has been handled has inflated the budget.
Whitman resident John Galvin, speaking for himself and not as a Finance Committee member, commended Stanbrook and the budget subcommittee for diving right into their work.
He said “net zero” describes the effect of reimbursement when they are properly handled.
“The problem is that’s not the way we’ve been doing it over the last who knows how many years,” Galvin said. Over the last five years the district has received $5,958,138 in Circuit Breaker reimbursement. It budgeted $3,235,000, not using $2,723,138.
“That money came out of the towns,” he said, noting that the percent of reimbursed funds has slid from 97 percent of money received to 34.88 percent — $600,000 of $1,720,374 — in fiscal 2022.
“We have $1.4 million sitting in that account today,” Galvin said. “What are we going to do with it?” He said another $1.2 million is expected in the next nine months.
Whitman Selectman Randy LaMattina said he was speaking as a representative of the town and that research he and Galvin have done on the issue also led him to ask why the Circuit Breaker funds the district received were not used to pay the expenses for which the district’s special needs kids qualified.
“It is not a net zero game,” he said. “Those expenses should have come out before the town’s assessment. … Why wasn’t this money used … for the kids, for the services?”
LaMattina said fiscal year 2020, the year use of the funds fell to 38 percent, and the resulting layoffs of 15 teachers within the budget cuts made, was blamed on selectmen from the two towns.
“In fact, there was probably $700,000 left of available funds that year that could have been used to offset those layoffs,” he said, asking for an explanation of how it happened and whether it was due to a misunderstanding of how Circuit Breaker works or something else.
“It’s almost two separate issues here,” LaMattina said Tuesday, Nov. 30. “We have a major accounting issue that has impacts Whitman and Hanson, and we also have an issue why in last three budget cycles has so little Circuit Breaker money been used?”
Whitman resident Shawn Kain pointed out that the cost of special education plans can be quantified and therefore should not be a surprise during budget talks.
Whitman Selectmen also discussed the issue at their Tuesday, Nov. 23 meeting during an update on the independent school audit requested by both towns. Galvin told Selectmen that both towns had approved the funding and Hanson had begun to accept bids when the process was put on hold due to the pandemic.
“Whitman and Hanson should definitely put it out to bid again, in my strong opinion,” Town Administrator Lincoln Heineman said, noting the bid information Hanson received is now two years old.
“It seems like it’s coming close to a time when it [might] yield some pretty interesting information, if I understand the School Committee meeting I witnessed last week,” Selectmen Chairman Dr. Carl Kowalski said.
He said Howard had called him and indicated that he understands what Galvin and LaMattina were talking about when they addressed the committee.
“He understands better now about the way special education money was funded and [that] he just needs a little more time to sort it out — have the committee work on it,” Kowalski said. “And I told him I could support that.”
Galvin reiterated his support for the budget subcommittee’s work as well as Stanbook’s, acknowledging that Stanbrook has just begun his accounting review and that the audit would help him in that work.