State report threatens school district recovery

EAST COUNTY — A preliminary report from the state’s Auditor General’s Office determined the Manatee County School District misused funds and lacked controls during the 2012-13 school year — findings that threaten the district’s financial stability in the future. 

The report says the misuse of funds and other mistakes could cost the district $7.2 million from its general fund balance, biting into the $10.3 million the administration is trying to save to meet state-mandated reserves.  

The district has not met minimum reserves — equal to 3% of its fund balance — for three straight years.

“We welcome the opportunity to work with the auditor general to remediate many of the report’s findings,” said Superintendent Rick Mills. “I cannot emphasize enough that the school district is dedicated to fiscal responsibility and avoiding costly decisions and oversights that continue to plague the district from past years. We are committed to overcoming this challenge and keeping the school district on the path of fiscal discipline as we move forward together to the greatness our students and community deserve.”

Steve Valley, school district spokesman, says the district has 30 days from when it received the report to respond to the findings. 

He emphasized the costs can be reduced.

“We are confident that the total dollar figure will be reduced,” Valley said.

The state report, which is released every three years, represents another roadblock in Mills’ recovery plan to move the district past mistakes that occurred before he came to the district.

In September 2012, former Superintendent Tim McGonegal resigned from the school district after announcing a multimillion-dollar deficit. 

External audits, including one by Navigant in January, found a “lack of proper management support, oversight and leadership in the budget process” from McGonegal’s administration.

The state audit began in March and concluded with the release of the report Nov. 25. 

It finds mistakes as far back as 2005. 

The $7.2 million penalty includes $5.48 million that may not have been spent in accordance with funding guidelines, the report says.

In addition, a workers’ compensation fund deficit of $1.71 million will require repayment from the general fund over the next two years. 

The above items, plus about $65,255 in purchasing-card rebates owed to other funds, amount to the $7,259,707 in possible repayment to the state. 

Julie Aranibar, school board chairwoman, says all of the errors come back to the same thing.

“There’s this public perception that all of the district’s problems came from one budget mistake,” Aranibar said. “This was not one mistake. This was a series of how business was done in the school district. There was a way of doing things that violated state law that was pervasive and promoted. Part of bringing in Mr. Mills was about changing that culture. But, at the end of the day, the school board is responsible now.”

Valley says the district has already addressed some of the issues.

For example, the district has set aside $724,788 in workers’ compensation repayment funds in this year’s budget.

The district will receive findings from a second audit by the state, this one on grant-funded programs, later this month.

District officials expect that report to bring more bad news.

“We are not prepared to go into any further details on any effect to the district’s financial recovery plan (until then),” Valley said.

But at a Dec. 10 school board meeting, the district promised to have a plan — and to present it to the state in person.

After both reports come in, board members, at the request of Aranibar, will join Mills on a trip to Tallahassee to present a reconciliation plan. The item was slated for approval at a school board meeting

Dec. 10, after the East County Observer went to press.

“We want to be a model for what compliance and reconciliation is,” Aranibar said.

Significant findings
• During the 2012-13 fiscal year, the district’s general fund balance declined 109%, from a deficit of $4.1 million as of June 30, 2012, to a deficit of $8.6 million as of June 30.

• District records lacked evidence that sales surtax proceeds were spent only for authorized purposes. This equates to $4.1 million in questioned costs.

• District records lacked evidence that ad valorem tax levy proceeds were used only for authorized purposes. This equates to $1.4 million in questioned costs.

• District records lacked evidence that Qualified School Construction Bond, State Board of Education Bond, Capital Outlay and Debt Service, and Public Education Capital Outlay proceeds were used for authorized purposes, resulting in $616,227, $196,861, $185,258 and $16,498, respectively, in questionable costs.

• The district did not timely obtain required background screenings for certain instructional and non-instructional contracted workers.

Contact Josh Siegel at [email protected].