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Curmudgeon's Corner: How does Wadovick's audit solve the problem?

February 15, 2012

On December 19th the North Kingstown Town Council unanimously approved the recommendation of town manager Mike Embury to engage the firm of Nadeau Wadovick LLC to conduct an audit of the school department’s financial situation in light of its projected deficit of $1.2 million for the fiscal year ending June 30, 2012.
I have expressed my concerns regarding this engagement to the school committee and town council last month during citizens’ comments and to Mr. Embury during meetings on December 19th and January 4th. I beg your indulgence, gentle reader, while I express them on these pages as well. I should add that I have also met with school superintendent Dr. Phil Auger and school committee chairperson Kim Page to discuss this matter.
Leading up to the special meeting on the 19th, I was told by the town finance director, Trish Sunderland, Councilman Chuck Brennan and council President Liz Dolan, in addition to the town manager, that there was a court order requiring the submission by January 17th of some kind of report to Superior Court Judge David Stern. Time, therefore, was of the essence and competitive bidding rules and involvement of the town audit committee, of which I am the chairman, had to be suspended.
The town council agenda for the special session called for “Authorization to retain the services of an Auditor to conduct a Performance Audit of the School Department”. Town Manager Embury told me this wording was incorrect and the engagement was for “a BEP audit”. “BEP” refers to the Basic Education Plan guidelines issued by the Board of Regents, a 46-page document most recently updated in June 2009.
The fact is, there was no court order on December 19th. The town solicitor, Jim Reilly, and school committee counsel Mary Ann Carroll agreed to the wording of a Consent Order at 5 p.m. that day –one hour before the council went into executive session. A Consent Order is a contract or agreement between the parties on steps to be taken in resolving a dispute.
The Consent Order states that the auditor will “perform a program and financial review for the purpose of identifying the nature and magnitude of the School Department’s projected deficit, and areas in which cost savings can be effected so as to avoid [a deficit] in fiscal year 2012.” The Order does not mention a BEP audit.
At 4:12 p.m. on December 19th a North Kingstown resident and former member and chairman of the town audit committee, Jeff Wadovick, submitted a nine-point proposal to conduct an “Accelerated School Budget Examination and Basic Education Program (BEP) Compliance Review”. Note the time. Mr. Wadovick submitted his firm’s proposal about an hour before the wording of the Consent Order was agreed to by the lawyers.
The first three audit steps deal with “2012 revenue sources (not an issue); a comparison of the school district’s final adopted budget and budget requests (not in dispute); and a review of school department budget accounts, expenditures, encumbrances and unencumbered balances to date and projected through June 30, 2012”.
The next four steps deal with trying to analyze the cost of implementing “the new BEP requirements.” Step 8 talks about the 2013 budget development process, which has nothing whatsoever to do with the projected 2012 deficit.
The final step seeks to determine “Status of communication and coordination of fiscal management procedures” between the town and school district. Again, what bearing this has on the projected current year deficit is unclear.
In other words, not one phase of the proposal deals with identification of “areas in which cost savings can be effected” –a violation of the Consent Order.
The Consent Order provides that a court hearing on the town’s “Request for a Preliminary Injunction” “shall be (not “is”) scheduled for a hearing on January 17th,…if needed”. The hearing was held on the 24th and 25th after Judge Stern postponed it. So there was no “deadline” for submission of an auditor’s report on January 17th.
Mr. Embury told the council that the fee for Nadeau Wadovick would be $22,850. An examination of the proposal shows that this was based on 30 hours of Mr. Wadovick’s time at $185 per; 85 hours of time at $185 for Sal Augeri, the educational consultant retained by the auditor; and 30 hours of office staff time at “$35-70 per hour”. The fee could be lower or higher depending on actual hours spent and excludes travel expenses including “travel to/from Florida, if necessary” by Mr. Augeri.
The Consent Order says “The parties will confer on the retention by the Town of an independent auditor to review NKSD’s financial records…” At 10:35 a.m. on December 20th Jeff Wadovick notified school superintendent Phil Auger that his firm had been engaged by the town the previous night “to review your educational compliance with the [state’s] Basic Education Program and your financial performance to the approved 2011-2012 fiscal year budget…”
During the school committee work session on January 17th, Attorney Mary Ann Carroll stated that on December 19th town special counsel Dan Kinder had mentioned the names of two accounting firms and that she replied that she was familiar with the two educational consultants he named and one of the accountants, Mr. Edge, but she was unfamiliar with Mr. Wadovick.
In other words, there was no conferring on the selection of an auditor – a violation of the Consent Order.
Finally, the Consent Order requires the school district to comply with RIGL 16-9-1 and file a plan with the state’s auditor general by December 20th to eliminate the projected deficit for the current year. The school department filed a two-phase program on how it plans to deal with $524K in overspending and a $712K shortfall in revenues.
This raises the interesting question of what happens if the auditor general approves the plan and the town’s independent auditor also submits a list of expense reductions. Does the school committee and administration violate the Rhode Island General Laws or do they ignore a Superior Court order?
Hmm ...
On January 25th school department director of administration Ned Draper testified under oath in Superior Court that steps had been identified to reduce the projected deficit from $1.2 million to $300K (without an iota of input from Nadeau Wadovick). This represents about one-half of one percent of the total budget. And the fiscal year has five months to go in which to bring the budget to breakeven.
Why should all this matter, you may ask. It is not inconceivable that the cost to the taxpayers of North Kingstown for auditors’ and lawyers’ fees and expenses and court costs will be in the range of $50 to $75 thousand. That’s why.
And to what end? To try to determine when the school administration knew the district faced a potential deficit and whether they notified the town manager in a timely fashion?
How does this address finding a solution to the problem?

Richard August is a North Kingstown resident and a regular contributor to the Standard Times. His opinions are his own. He can be reached at richardjaugust@yahoo.com.

Source 
Southern Rhode Island Newspapers
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