D’Amico: Town Kept $1.5 Million Intended for School District

by | Aug 19, 2019

By Elizabeth F. McNamara

Finance consultant Mike D’Amico told the School Committee last week he’d calculated that over the past 10 years, the town has gotten a total of $1.5 million in reimbursements from the state that should have gone to the school district. 

“Back in April, I was looking at the housing aid the town gets [from the state] and something about how it was being accounted for and how it was being booked didn’t look right,” he said Wednesday. But not all transactions had been booked yet so D’Amico dropped the issue. 

When he went to recheck the figures in July, after the 2019 fiscal year had closed, he found the discrepancy and was able to track it back through the years to 2010*. 

The state Dept. of Education (RIDE) has been reimbursing East Greenwich school bond money at a rate of 35 percent. So the $52 million approved by voters to pay for the new Cole Middle School and other school improvements back in 2007 the state has been sending checks back to the town covering 35 percent of the cost. That money goes to the town and not to the school district because the town issues the bonds. 

But some capital expenditures reimbursed by RIDE came out of the school district’s operating budget, not the bond money. When that reimbursement money came back to the town, it should have been passed on to the schools, D’Amico said. 

It’s complicated, he told the School Committee. Those RIDE reimbursement checks didn’t exactly match the amounts that were spent. The only way to figure it out was to look at year-end totals. Another complicating factor is RIDE didn’t used to reimburse for many of the capital expenses included in the operating budget. In recent years, that changed.

Looking back over the past 10 years, D’Amico told the School Committee, the amount of reimbursement money that should have been passed through to the district was below $100,000 for the years 2010-12. But it grew to as much as $377,000 in 2016, no small amount for a district that was continually cutting its capital expense budget line to be able to maintain programs.

Examples of the types of expenses RIDE reimbursed out of the school district’s operating budget from fiscal year 2018 were $62,000 for district HV/AC repairs; $10,500 for masonry repairs at Hanaford; and  $6,500 for fire alarm sprinklers at Eldredge. According to D’Amico, the district should have been reimbursed a total of $112,000 for 2018. (Find information about each year here: RIDE Reimbursements.)

“The general idea is that whoever has to spend the money gets the reimbursement,” said Committee Chairwoman Carolyn Mark after the meeting. “The schools have not been getting their share of the reimbursements for capital projects.”

To the outside world (in particular, bond rating agencies) the town and schools are one. The town controls the money and gives money each year to operate the schools. But the school district must maintain its own fund balance. 

“When you think about the fund balance for the town as a whole, it would seem it was kept on the town side and should have been on the school side,” Mark said. “It would seem that this money should have rightly been transferred to the school side of things.”

She said the money would “absolutely go into the capital reserve fund” to lessen the impact any one year on the school’s operating budget.

At the meeting, the School Committee directed Supt. Victor Mercurio to talk with the town manager about the findings, to figure out next steps.

The Town Council has been alerted to D’Amico’s findings but has not yet met to discuss it as a group.

Council President Mark Schwager last week said town staff is looking into it, including the town solicitor, the finance director and the town manager (EG’s new town manager, Andy Nota, takes over Aug. 31; Joe Duarte is acting town manager until then).

“We need to review as a council what the request is from the School Committee,” he said.

*The failure to pass the money on to the school district didn’t necessarily start in 2010,  D’Amico said. But he stopped at 2010 because RIDE reimbursements were significantly lower at that time and the paper trail to uncover amounts prior to 2010 becomes more obscure.

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