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Citing continued concerns with the School Department’s financials, the Middletown Town Council voted on Monday night for sweeping changes to try to correct those issues.

This followed news last week the schools again overspent their budget — this time for $1.2 million-plus.

The Town of Middletown shared the following press release on Tuesday,

Town Council votes for Town to oversee school spending, performance audit

MIDDLETOWN, R.I. (MARCH 21, 2022) – The Town of Middletown is now controlling purchasing for its schools.

Citing continued concerns with the accuracy and reliability of the School Department’s financial reporting, the Town Council voted Monday night from Town Hall to have Town Finance Director Marc Tanguay and his office manage all school spending.

At the same time, the council signed off on a “performance audit” of the school’s financial records. The item was requested by council President Paul M. Rodrigues. The council also approved pushing back the submission of the proposed annual budget to May 1, a month later than normal due to the school budgeting snafu.

On a symbolic level, a split council also voted “no confidence” in Superintendent of Schools Rosemarie K. Kraeger, saying the problems have gone on long enough. Kraeger was not in attendance for the meeting, but School Committee Chairwoman Theresa Spengler said the council was off base and the superintendent and school staff was doing a good job, especially in light of chronically underfunded budgets.

The moves come in the wake of news late last week that the schools again overspent their current allotted Fiscal 2022 budget, this time to the tune of close to $1.260 million.

“On Jan. 31, we were notified in their financials that state that the School Department was favorable by $1.3 million and now, a month and a half later, we were notified that there’s a deficit of $1,259,000,” Rodrigues said. 

“Look, we don’t want to argue with our School Committee. We’ve done that enough over the years. We’ve asked plenty of questions over the years. There’s not a lot of faith in the numbers currently, based on how they’ve been all over the map and requests we’ve had to get those numbers and the timeline we’ve asked to get those numbers. We can’t sit on our hands. We all want to do what’s best for the Town.”

In finance circles, a performance audit takes an independent third-party look at the efficiency and effectiveness of government programs to see if there are ways to make they function better. 

Among the questions a performance audit is intended to answer includes:

  • Are school programs meeting their intended outcomes and objectives?
  • Are services offered by the schools done so efficiently and equitably?
  • Are the legal requirements of the schools being honored? 
  • Do school programs use evidence-based best practices?

For the second time in less than five months, the School Department reported last week spending more money than it was allotted.

In a March 17 letter to Rodrigues and Town Administrator Shawn J. Brown, Spengler wrote about the issues with the current Fiscal 2022 budget.

According to the two-page memo, the district overspent its special education budget by close to $1.16 million. This included about $640,000 more than was allocated for out of district tuitions for special education students as well as an extra $200,000 for a payment to the Newport County Regional Special Education Program.

Spengler also reported the district exceeded its line items for custodial supplies, heating and ventilation supplies and snow removal by more than $101,000. To check out Spengler’s memo, visit https://www.middletownri.com/DocumentCenter/View/4210/Letter-from-Chair-Re-Budget-1-031722 online.

To address the deficit, Spengler wrote the school’s put in a purchasing freeze in late January on all non-essential items. She also indicated the school’s would like to tap into some of the close to $5 million in American Rescue Plan Act money awarded to the Town as a way to help offset shortfalls.

Town officials said the school finance office was also being assisted by staff from the office of the school attorney and another outside expert to help square away the educational numbers.

Saying the council was “nitpicking,” Spengler said the schools have been speaking about the funding shortfalls from the Town going back a decade, with no or minimal annual increases to the educational figures. 

“I know that nobody ever likes to hear it, but you know as well as I do with the inconsistencies of funding, the School Committee and the School Department cannot generate revenues, if you look at the multiple zeros that we’ve had over the course of the years, we still have contractual agreements, we still have regular overhead costs, things go up, we all know in our personal budgets, you have to be able to plan accordingly,” Spengler said. “So, if you get a zero increase, that creates a problem and that’s what we were using the fund balance, to offset those costs.”

As a businessman, Councilman Christopher Logan said things work much, much different in the private sector than what he was seeing with the Middletown schools.

“I remember a very spirited discussion back in November between us and the School Department that essentially came down to ‘We’re taking care of it, mind your own business…’” Logan said. “I have a huge issue with this. I’m not an accountant, but I know what money comes into my house and I know how much money goes out for a reason to make sure I have the funds to feed my family and I don’t overspend…Where I come from, from the private sector, when we have an issue like this that’s been brought to light, you thank people for their service and walk them out the door because something has grossly gone wrong from just a few months ago.”

“To go from the end of January from $1.3 million to the good and now we’re in the middle of March and we’re $1.2 million in the red, is anyone steering the ship?” council Vice President Thomas Welch added.

Councilman Dennis Turano — who made the “no confidence” motion on Kraeger — said he’s grown tired of the issues with the School Department time and again. 

“I’m just amazed by this whole process,” Turano said. “I’m more interested in how they’ve spent the money…One minute, we’re looking at one number and the next minute, we’re looking at another number that’s 400 times higher and no one seems to know where the left hand is and the right hand is.”

This all comes at the heels of news late last year that the schools overspent their budget for Fiscal 2021 by a figure that finally was set at more than $300,000. That number came about after the schools used more than $1 million in fund balance money to cover a deficit from school overspending.

According to state law Section 16, school districts cannot overspend the bottom-line budget set by the governing council that runs the community. 

At the same time, he wrote the School Committee must report to the Town Council that it overspent its budget and a corrective action was in place. This step is required under the Rhode Island General Law 16-2-9(f), which mandates the school board report any potential or actual overspending to the council within five days of its discovery.

According to state law 16-2-9, the School Committee must maintain a budget that does not result in debt. 

If a budget that results in debt is discovered, 16-9-1 mandates the School Committee must notify the Town its expenditures are more than what was budgeted for that fiscal year. 

Section 16-2-9(e) requires the School Committee no more than five working days to tell the Town, council President and Town Administrator of the overage in writing. That notification must include a statement of the School Committee’s corrective actions. The state Auditor General must approve the plan and it must be filed with the state Division of Municipal Finance. Section 16 also gives the Town the authority to take over the school’s finances should there be overspending.

Had the School Committee believed it did not receive enough funding to support its mission to educate children, state law under 16-2-21.4 provides legal recourse to seek additional money if all other avenues with the Town are exhausted. Such a course was not taken by the schools in Fiscal 2021 or the current Fiscal 2022 budget.

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