According to the financial statement audit, the Mason County Board of Education incurred expenditures and/or obligations in the general fund that caused a negative balance for the previous fiscal year, which ended on June 30, 2009. Specifically, the board over expended the money in the capital projects fund, but it was required that the deficit be transferred to the general expense fund.
According to Mason County Schools Superintendent Dr. Bill Capehart, who took office on July 1, 2009, following the end of the fiscal year, the district must come up with an approved plan of action to clear the deficit.
“I did not have any idea that I would have the challenge to work with such a dilemma. I had no idea the amount of debt,” Capehart said. “I knew I’d have to require an audit because the state code requires schools to be audited each year. I reviewed the 2008 audit and there was a deficit, but it was not in the general expense fund — it was in the capital projects fund.”
He added that in 2009, the state said that the money should not be in the capital projects fund, but in the general fund in order for the deficit to be repaid. Capehart said that during the months of July and August he worked with the West Virginia State Department of Education on a repayment schedule to reduce the $2.8 million deficit from the general fund.
Capehart described the debt as a very serious issue.
According to Capehart, the deficit first appeared in 2008, but became important when it was placed in the general expense fund.
“It appears that since the district had five major building projects and during that time change orders were approved by the past administrations and unfortunately adequate funds as the audit shows were not within the budget to approve these change orders,” he said. “In checking with Gary Mitchell (buildings and grounds supervisor) the district had over 100 change orders of varying amounts, but the bottom line is that, unfortunately, the change orders exceeded the amount of funds available.”
Capehart emphasized that while the change orders were placed in the capital projects fund, they became critical when the deficit was placed to the general operations fund budget, which is where salaries and transportation payments originate. Joe Panetta, the West Virginia Department of Education State Superintendent of Finance, also described the debt as being especially significant. According to Capehart, a corrective action plan has been sent to Mason Country Prosecuting Attorney Damon Morgan’s office. The plan, which has already been approved by Panetta’s staff and is now being viewed by Morgan’s office, proposes to reduce the debt within the next three years.
“We anticipate reducing the deficit by a minimum of $817,547 this year from the sale of a building, the utility savings from the sale of that building, funds that were already in the budget to reduce the capital projects fund and a payment on the naming rights agreement,” Capehart said.
The plan also anticipates a significant savings in payroll due to 22 professional positions and six service personnel positions that have been placed on the reduction in force (RIF) list this year. According to Capehart, the board will continue to look at each position when an individual resigns in order to determine the need for the position or how to reduce the number of days in the position or conversion to a half-time position.
Other aspects of the plan include taking next year’s budget and setting aside at a minimum the same amount that was in this year’s budget for deficit reduction, utility savings, the fourth payment on the naming rights agreement and additional funds from the payoff of a lease purchase agreement in the 2010 fiscal year. In addition, in next year’s budget all lines will be reviewed for a reduction, if feasible, including but not limited to, substitute costs, utilities, supplies and equipment. For the plan to be fully implemented, Capehart said that the state education department must approve it along with the Office of Education Performance Audit.
“We are solvent. We are on a corrective action plan and we will be out of debt as per our approved plan within the next three fiscal years,” Capehart said. “My mission or goal has been primarily to protect instruction and student service while still attempting to follow this very structured repayment deficit plan.”
Capehart said that the board has been very supportive of the plan.
“Upon receiving knowledge of the financial picture in Mason County Schools, I immediately went to the board of education to alert them of the revenue deficit. All five members have been superb in support of me as superintendent and for the deficit reduction in Mason County Schools,” Capehart said. “When I alerted the board members to (the debt) they acknowledged several change orders being brought to them, but I can ethically state that not one board member realized that one, the deficit was in the wrong account and two, not one board member realized the significant seriousness of the problem.”
Capehart stressed the importance of community support.
“At this time we are planning for the 2010-2011 school year with less staff and I, as superintendent, can assure the board and the public that we will continue high expectations for our kids and we will come out of this,” he said. “We are going to need the understanding and assistance of the Mason County community and our employees to reach this goal in three years. Although this year is tough, the next two years will be more of a challenge.”