Farley Said School Committee Showed Less Attention to Budget Than Required by Law

Councilor Michael Farley sent the following feedback after the Newport School Committee provided the requested documents under the Freedom of Information Act and the Rhode Island Access to Public Records Act.

Thank you for providing the documents which I requested on May 31.  I have had a chance to review them, and wanted to share my comments with you so that we are all on the same page.  I have broken these comments into several sections.

Monthly Budget Revision Issues

With respect to budget revisions, it appears that the School Committee made no revisions to the budget between August 2012, and June 2013.  Given the huge budget issues reported to you by Dr. Ambrogi, this was a mistake.  It is not excused by problems getting the accounts onto UCOA, or abdicating responsibility to the Superintendent.  The Committee showed less attention to budget issues than is required by Rhode Island law.  

• The school committee is empowered to make revisions to the budget at any time during the school year.  See RI General Laws §16-2-9(a)(10).

   

The committee was aware of actual and potential under-budgeted expenditures and under-budgeted revenue items as early as December 2012.  These issues were specifically raised to you by Dr. Ambrogi in your March and April meetings, yet no committee actions were taken at that time.  In response to a specific FOIA request, no documents could be provided for any committee budget revisions after August 2012.  

The result of committee inaction is a projected budget deficit of over $88,000, and approximately $360,000 in deferred capital repairs.  The city needs you to do a better job on monthly budget revisions next year.

Disclosure Obligations

With respect to your obligation to disclose actual and potential line item deficits and revenue deficiencies, I do not wish to belabor this point.  I am confident that if the committee takes Mr. Galvin’s advice, and the budgets are tended more closely in future months and years, this will not be a future issue.  

But to be clear, you are obligated to promptly report actual or potential budget issues in a timely manner, including “any obligation, encumbrance, or expenditure” AND “any revenue [] less than the amount budgeted.”  The specific statute is very clear:

(f)     In the event that any obligation, encumbrance, or expenditure by a superintendent of schools or a school committee is in excess of the amount budgeted or that any revenue is less than the amount budgeted, the school committee shall within five (5) working days of its discovery of potential or actual over expenditure or revenue deficiency submit a written statement of the amount of and cause for the over obligation or over expenditure or revenue deficiency to the city or town council president and any other person who by local charter or statute serves as the city or town's executive officer; the statement shall further include a statement of the school committee's plan for corrective actions necessary to meet the requirements of subsection (d). The plan shall be approved by the auditor general and also submitted to the division of municipal finance.

RI Gen Laws 16-2-9(f) (emphasis added).

Please also keep in mind that our city manager and finance director are obligated to provide all city council members with a monthly budget report which must include a statement about school committee expenditures and revenues.  You must use this opportunity to keep the council apprised of all budget developments in the event you require a supplemental funding, and so that there is no surprise when you report a need for a funding increase in the following year.

It is clear that the School Committee was notified by Dr. Ambrogi throughout the year about significant obligations which were in excess of the amounts budgeted (bus monitors, salaries, pension obligations, substitute teachers, special ed/tuitions), as well as revenue deficiencies.  These issues were openly discussed in committee meetings, and are available for review on videotape, yet the committee failed to disclose these issues to the city or state, either through ignorance of the disclosure law, misplaced optimism or over-reliance on Dr. Ambrogi.

The result of concealing these issues (whether intentional or not) is further distrust between the council and committee, and a projected budget deficit of over $88,000 for this year.  The city needs you to do a better job on this issue next year, and I am confident that attention to this issue will naturally follow your attention to monthly budget reports.

Superintendent Authority on Budget Issues

After reviewing the scant budget revisions, and the conflicting budget disclosures made by Dr. Ambrogi to various entities (as provided in the FOIA response), it appears to me that he has been permitted to exceed his authority in regard to budget oversight.  I have been harshly critical of Dr. Ambrogi, but to be fair, he was acting as was necessary under circumstances which were permitted to exist by the committee.  Viewing his actions in the most favorable light, I believe that his actions were a direct result of a “perfect storm” of poor budget oversight in the prior year, committee inattention to the budget during the school year, the delay in UCOA coding, and unanticipated (but state-mandated) obligations.  

The committee must hold the reins more tightly on budget issues.  Every single month the school committee must carefully track your projected expenditures and revenues.  I understand that this has become the practice, but you cannot abdicate this responsibility to the superintendent.  

In the absence of committee authority or attention, Dr. Ambrogi was obligated to make budget decisions which were not his to make.  Dr. Ambrogi made you aware of specific items which were underbudgeted throughout the year, yet you never voted on revising the budget or requesting a supplement from the council.  In the absence of action, Dr. Ambrogi did what he thought was right by refusing to spend from the capital fund.  Unfortunately, this decision was in excess of his authority, and actually violated policy until that policy was suspended yesterday.

Because the school committee did not give him the tools to perform his job, Dr. Ambrogi made unilateral decisions on budget issues, and made unilateral decisions on what would be reported to the various entities.  As a result, different budget information was reported to the committee and to the council.  For the period ending 3/31, the committee was advised of a $379,000 shortfall, while the city and state were advised of a $29,000 surplus - a discrepancy of approximately $410,000.  Although he advised you by memo that he was assuming that you would give him the authority to use the capital fund to fund the shortfall, there were several problems with his action – he never told the city or state of his assumption, his assumption was in violation of school policy, and there was no discussion or vote to lift the policy or authorize the transfer until June 11th.  

The result is the appearance that two sets of books were maintained: one set which tracked the actual budget authorized by the committee, and one which was the actual budget based solely on decisions made by Dr. Ambrogi.  Compounding the problem is the fact that neither one was accurate.  The city is counting on you to do a better job next year on exercising your budget responsibilities.  

2013-14 Budget Submission

In your budget submission for 2013-14, you used the 2012-13 “requested” budget as a baseline.  The better approach would have been to use the 2012-13 “actual” budget from May, or the most recently adopted revised budget which should have been prepared.  This should make sense to you given the six or more categories of line items which were under-budgeted in your 2012-13 “requested” budget.  By using those bad numbers as a baseline, you have contaminated next year’s budget.  Moreover, doesn’t it makes sense for budget-makers to have the benefit of 12 months of your budget experience?  We should have some visibility as to where savings were achieved and where expenditures were different than expected.

The city is counting on you to present a more transparent, more reliable budget next year, and I am confident that you will do so.

Conclusion

In conclusion, I regret the tone of my public comments, but not the content.  I ask that you try to understand that my comments were reflective of my frustration with a variety of factors: poor communication between the council and committee, the committee’s misunderstanding about its various legal obligations, and the abject institutional resistance from both council and committee to improving our process.  

Now that the issues are out in the open, and now that you have requested and received counsel on these issues from your legal representative, we all have a better sense of your legal obligations of budget oversight and communication of actual and potential budget issues.  I am hopeful that with this knowledge and experience, we can move forward as partners for the benefit of Newport Public Schools.