Finance Board Responds To Council On Audit Letter

By John Voket

Although the Newtown Board of Education this week returned to the practice of reviewing financial reports and approving budget transfers, the Board of Finance responded to a management letter issued by town auditors regarding the school board’s interim policy, which absolved members from having to regularly review and approve those budget adjustments.

As part of the Legislative Council’s resolution to approve the audit in January, which covered the 2009-2010 fiscal year, Chairman Jeff Capeci said his colleagues requested the advisory letter from the finance board as a matter of “housekeeping.”

“In January, the issue of the auditor’s remarks about the board of education’s policy on transfers was still unresolved,” Mr Capeci told The Bee. “We wanted to be sure any open items were closed out properly.”

This prompted the council to request the finance board’s opinion on the matter, and on February 14, the finance board approved and dispatched its response to council members.

The letter briefly reviews the history leading up to the September 2009 Board of Education vote that required transfers only in the event of “error or correction.”

“This action apparently did not change the current standing policy of approving transfers, but will arguably complicate the matter,” the finance board memo states. “Shortly following that action, the Board of Finance officially requested that the Board of Education revert to their standing policy on transfers and perform them according to that policy. The primary reasons were for clarity and financial controls, but also to comply with existing Board of Education policy, town charter, and state statute.”

While the finance board supported the Board of Education policy of “encumbrance based” budgeting as enacted, finance officials said that reviewing encumbrances “should be coupled with performing transfers as a matter of practice.”

Among a number of suggestions made in the memo, some of which were corrected by the subsequent school board actions the following evening, was a suggestion to provide greater detail on both “macro” and “micro” shifting of funds within the school’s nearly $70 million budget.

“The Board of Education should consider instituting a policy of financial controls that is more detailed than ‘object code.’ Perhaps extending the transfer threshold to a line item of a certain amount or greater,” the memo states. “This would provide more transparency and clarity as well as oversight of spending. Currently ‘object codes’ vary greatly in amounts and because current policy provides an amount or percentage threshold (or greater) for transfers, this creates inconsistency with transfer amounts.”

For example, the finance board pointed out that the salary object is dramatically larger than supplies and could render a substantially larger transfer without oversight of the Board of Education.

The memo also points out that the Board of Finance, as allowed by charter, has the authority to institute regulations and reporting practices with the approval of the Legislative Council.

“However, we understand and respect the Board of Education’s role and autonomy and recommend that they implement practices consistent with existing requirements including the above mentioned items,” the memo concludes.

Mr Capeci said that looking forward, he expects the finance officials’ concerns to “go away if the school board complies with the charter, state statutes, and their own board policies.”