Guest contribution by Arthur Green
The administration is quick to point out that we operate with a bottom-line budget, and that the line items appropriated in the budget do not determine how the money may be used. But, our policy imposes a control on that discretion, namely, board approval for transfers exceeding $25,000.
Policy DJB, which reads in relevant part:
The Board authorizes the Superintendent or Business Administrator to transfer funds between function object codes (7-digit code) up to $25,000. Any transfer in excess of $25,000 shall first require Board approval and authorization.
The important financial control that this policy is supposed to impose has not been effective and here’s how you can tell.
The actual expenditures for 2017 show numerous expenditures exceeding the appropriation by more than $25,000:
The plain wording of the policy is that each of these items should have been brought to the board for approval before any expenditure exceeded appropriation by more than $25,000.
Did the board approve these transfers? With one exception, I am not aware of such votes, although I would be happy to be corrected. The exception I reference is the acquisition of Achieve 3000, which was approved in Sept. 2016 with the understanding that the funding was not explicitly appropriated – this is the over-expenditure of $190,000 on line 1100.643. Donna Green reported at the time that the board did not find it necessary to identify the budget lines impacted by this transfer.
Absent board approval, the total unauthorized expenditure is $710,000 (keeping in mind that no board approval is needed for the first $25,000 over-expenditure on each line item).
Transfer of appropriation is covered in municipal budget law by RSA 32:10, which reads in part:
If changes arise … that make it necessary to expend more than the amount appropriated for a specific purpose, the governing body may transfer to that appropriation an unexpended balance remaining in some other appropriation
Yes, we operate on a bottom-line budget, but the authority to use money for a different purpose than appropriated rests with the governing body – in this case the school board. As we see above, the school board has delegated that authority to the superintendent through policy DJB, but only up to the amount of $25,000 for a line item.
There is a further controls issue which needs to be addressed.
For several of these line items, the amount reported by TRSD as the 2017 budget amount (as it appears on monthly financial reports and the budcom budget preparation documents this year) differs materially from the final voted budget.
We have been told in the past that there the reported budget amount is adjusted to reflect encumbrances carried from the previous year, offset by revenue (not included in the Unassigned Fund Balance). These should be exceptional situations, and small dollar amounts. In the TRSD budget of approximately 250 line items (excluding placeholders), there are about 60 lines for which the reported 2017 budget amount differs from the final voted budget. The administration has been asked by Mrs. Green to explain why and has not responded.
Looking at line 1100.643 – Information Access Fees, (the Achieve 3000 acquisition referenced above), the administration is reporting the budgeted appropriation on that line as $336,000 instead of the $143,000 voted budget. This makes no sense, because the board vote was to allow an over-expenditure of the voted appropriation line, not to report a different appropriation amount. But even more curious is the fact that the higher number was being reported as budget in the monthly financial report for July 2016, over 2 months before the board “approved” the “transfer”.
With this lack of clarity on the actual voted budget, it is difficult for the board to effectively exercise meaningful oversight on expenditures, in particularly understanding areas of over and under-expenditure. It is also difficult for the Budget Committee to have clarity on the relationship between budgets and actual expenditures.