THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, September 12, 1995 TAG: 9509120258
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY KAREN WEINTRAUB, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 79 lines
The City Council is expected to approve a strongly worded resolution today that condemns the school district for mismanaging funds and lays out strict requirements for the district in return for a city bailout.
In a report delivered to council members Monday evening, City Manager James K. Spore outlined a number of actions that he and his staff think the district should take to help restore the credibility it lost by finishing last school year with a $7.4 million deficit.
At stake, according to the report and resolution, are the city's cost of doing business and the respect it holds with its taxpayers.
``The School Division's unbudgeted and unauthorized spending jeopardizes the financial health of public education in the city, and poses a threat to the good financial standing of the city and its agencies,'' the proposed resolution reads. ``Neither the children in the public education system nor the city's taxpayers should bear the burden for the lack of fiscal management by the School Division.''
It is unclear how the district managed to spend $3.5 million more than it was allowed and to predict $4 million more in federal revenue than it had ever received. Last week, the City Council authorized an expanded audit to uncover precise causes of the miscalculations.
The city manager's report details several financial management problems and warns that many of the troubles may have been carried into the current year.
Among the problems mentioned: The School Board did not learn of the deficit until two months after the end of the fiscal year because the district's financial control system was inadequate; and this year's budget calls for spending textbook-fund money that doesn't exist.
Spore's plan calls for the city to wait until Nov. 7 - after the audit of last year's books and a complete review of this year's finances are completed - before giving the district money to balance its books. The city can afford to pay the district, Spore wrote, but doing so means less money will be available for other projects.
School Board Chairwoman June T. Kernutt said Monday night that she is disappointed the council might wait so long to give the district the money, but she understands the city's concerns.
``I think that we need to get this behind us,'' Kernutt said. ``I understand their position, but I don't think it's necessary to wait until then.''
Kernutt and other board members have said the school administration repeatedly told them that last year's books would come out in the black. The board only learned of the deficit on Aug. 25, a week after being assured yet again that the district would finish the year with a modest surplus.
School administrators said they also learned of the problems in late August when the city's finance director, in closing out the 1994-95 books, noticed the imbalance.
Superintendent Sidney L. Faucette, who left the district in June to head a school system in Georgia, said last week he was surprised to hear of the deficit.
The finger-pointing is precisely why City Council member John A. Baum said he wants to wait a few more weeks before helping to erase the deficit. He said he wants to ensure that those responsible for the problems are held accountable.
``The main thing is we don't want this to happen again,'' he said Monday night. ``If we put the money forward too quickly and there is any wrongdoing, it's sort of like we relieve them of the responsibility.''
To increase fiscal reliability, Spore recommended the district:
Provide the City Council with regular financial reports about the status of the annual budget and construction projects. In recent years, the council has only received information on an annual basis.
Prepare an analysis of any action the district takes that costs money. If the spending was not predicted in the annual budget, the district should identify a funding source before proceeding with the program.
Better manage its self-insurance fund, which now has a deficit.
Develop a plan to consolidate the school district's accounting, payroll and purchasing functions into the city's finance department.
KEYWORDS: BUDGET VIRGINIA BEACH CITY COUNCIL by CNB