THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, November 7, 1995 TAG: 9511070268
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY ALETA PAYNE, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 82 lines
School Board members must now decide whether to accept the city's terms for a bailout, which would include consolidating the school system's financial operations with the city's Department of Finance.
At its meeting tonight, the board will hear from the accounting firm that determined the school district's shortfall for the last fiscal year was $12.1 million, or about $4.8 million more than first thought. The deficit is a stinging blow to the state's second-largest school system, which is under stringent spending measures to prevent another shortfall at the end of this school year.
When board members first considered the city's demand for consolidation almost two months ago, they agreed to study the issue but stopped well short of accepting it. Now, with even more pressure likely from the City Council, it is still uncertain whether a majority of board members would favor combining their financial operations with those of the city.
``We've seen some preliminary ideas, but we haven't seen a plan,'' said board chairwoman June T. Kernutt. ``I would be no more or less inclined until I see a plan.''
Karen O. O'Brien, who joined the board last spring, said she and her colleagues need to discuss the matter further.
``We cannot ignore the idea of it,'' she said. ``I think there are some strong points that benefit the city and School Board.''
It is not clear what would happen if the board voted against the plan. In a memo Friday to council members, City Manager James K. Spore included consolidation as a condition of loaning the school division money to make up the shortfall.
``There are a number of options that council can address,'' Spore said Monday night. ``I'm hoping it will not come to that. By now, everyone should see the wisdom of the consolidation. It's something we should take advantage of with or without the crisis.''
Mayor Meyera E. Oberndorf offered a cautious observation.
``What the School Board and the district's administrators need to do is apologize and say they will do their level best to repay that which they have spent,'' she said.
``The bottom line, and the thing that has made local government very different than the federal government, is that you can't spend more than what you have. The budgets are just like a household's.''
Combining school and city financial operations has been a sharply debated issue in the Beach, and some view it as an effort on the city's part to take control of running the school district.
``I'm not sure consolidation is the answer at this point,'' said board member Tim Jackson. ``We have a problem that needs to be fixed. But it's clear our problem was a lack of leadership.
``I'm convinced we can fix our own problems.''
For board member Joseph D. Taylor, combining services makes sense because it would save money through ``economies of scale.''
``I've always been one of the advocates for consolidation of services,'' he said. ``I'm in favor of it.''
City officials clearly see the move as a way to better control a system that the outside auditors have concluded ran without the most basic checks and balances.
Among the findings in the report by KPMG Peat Marwick were:
The budget lacked realistic supporting assumptions and documentation in key areas.
Budget unit directors, including principals and department heads, lacked the primary authority needed to control expenditures and remain within budgetary guidelines.
Excessive budget transfers were used to hide overexpended line items.
Actions in previous fiscal years impacted 1994-95.
Superintendent Sidney L. Faucette, who left the division this summer to lead a Georgia school district, has said he relied on information from his finance staff on the health of the system's funding.
Mordecai L. Smith, the division's chief financial officer who is on administrative leave, said Faucette ignored repeated warnings of impending crisis. MEMO: Staff writer Tom Holden contributed to this report.
KEYWORDS: DEFICIT BUDGET VIRGINIA BEACH SCHOOL BOARD by CNB