Board of Education Addresses Audit, Steps Forward, for Essex, Chester, Deep River Schools

ESSEX, CHESTER, DEEP RIVER — Almost three years after Regional School District 4 made an unfunded purchase of property for $350,000, and almost a year after the board first became aware of the deficit, the state has requested a corrective action plan from the district. That purchase was made under the guidance of former superintendent Ruth Levy and former business manager Kimberly Allen.

It all comes down to zeroes and ones and a lack of accounting expertise in the district’s business office that resulted in deficits in the capital sinking fund, cafeteria fund and health insurance fund — according to a 2019 audit of the regional school district for Essex, Chester and Deep River.

“The District does not have proper internal controls to ensure the completeness and accuracy of nonstandard manual journal entries and account reconciliations,” said Michael VanDeventer, an accountant for Mahoney Sabol, in an audit presentation to the Board of Education on Thursday evening. “Reports that were being provided to prior year audits and throughout the year were not accurate and cash accounts were not being balanced.”

The accounting errors resulted in an overstatement of funds in the general ledger that convinced the board of education they did in fact have enough money for the Mislick purchase.

Each of the repeated errors appeared to occur with non-recurring expenses and transfers, such as the land purchase and paving work completed in the summer of 2019 without approval from the Board of Education.

“There were also a number of transactions concerning cash between the districts and R4 that were not properly recorded in the general ledger,” Vandeventer said. “The finding did not apply to payroll transactions.”

This is not the first time that concerns about accounting practices in the region have been raised during a yearly audit review. In fact, the same material weakness was reported in the 2018 audit presented to the board in the spring of 2019.

“It was my hope that it would be addressed last year,” VanDeventer said. “In November we found that the finding was not appropriately addressed and a substantial amount of work would need to be done to properly close out the accounts.”

Allen, the former business manager, resigned not long after the November presentation.

In January, with the hiring of interim business manager Richard Huot, the business office began work to reconcile and finally properly close out the 2018 and 2019 accounts.

“We’ve taken a multitude of steps this year to start to address various financial issues as they became known to us,” said Superintendent Brian White at Thursday’s meeting. “I’m proud of the work I’ve done with this board to increase our transparency and the work to correct a lot of the internal system.”

According to Huot and White, training for incoming business manager, Kelly Sterner, has already begun so that she will be able to continue the new practices. Sterner is the longtime finance director for the Town of Essex.

With a current deficit of $429,729 in the capital sinking fund, VanDeventer recommended several options to the board and administration to consider including funding the deficit through budgetary appropriations in future years, through a supplemental appropriation from Chester, Deep River and Essex or partially with a transfer from the general fund surplus.

“Establishment and adherence to a capital reserve fund policy will ensure that an unfunded deficit does not arise in future years,” VanDeventer said.

With a corrective plan moving forward, transparency in the process and several lingering questions answered, board members and town residents alike seemed to exhale a collective sigh of relief as the virtual meeting came to a close.

“Thank you to the board members and Brian, you’ve really done a tremendous job over the past few months,” said Essex resident Jim Carey. “It’s appreciated by those paying attention.”