By Melissa Fales
WARE – According to figures from the Massachusetts Department of Elementary and Secondary Education (DESE), the town of Ware owes the Ware Public School district approximately $1 million because the town has included the cost of health insurance for retired teachers in its net school spending expenses, a practice the state says it is not authorized to do.
Following the Educational Reform Act passed in 1993, only those towns that included retired teachers’ health insurance costs as indirect costs paid on the school’s behalf in fiscal year 1993 were allowed to continue to count those costs towards net school spending moving forward. The state claims that Ware is one of 126 towns that did not include those costs in fy 1993, but has been including them its net school spending ever since. Town Accountant Tracy Meehan, who has been at the job since 2007, said the town has always included those costs in its net school spending. Unfortunately, she said the town doesn’t have detailed records to prove that it did in fy 1993.
The problem was discovered when Andrew Paquette with the Management Solution, the district’s business consultant, filed the required End of Year Pupil and Financial Report (EOYR) for fiscal year 2011 with the DESE, outlining the town’s expenses on the school’s behalf. “When I did the report for fiscal year 2011, it kept coming up that Ware did not meet the minimum net school spending amount,” said Paquette. Paquette said he did the report twice, to make sure that he hadn’t made a clerical error.
When DESE School Finance Administrator Roger Hatch received the report, he determined that the reason the minimum school spending hadn’t been met in fy2011 was because those retirement costs had been counted towards the total.
Paquette explained that a town has to pay at least 95 percent of its minimum net school spending requirement. If a district falls short of the minimum by more than five percent, the difference is subtracted from the next year’s state aid. Hatch projected Ware’s net school spending number for fy2012 would show a shortfall of approximately $1 million, or approximately eight percent below the required amount. In order to reach that 95 percent threshold and come into compliance for fy2012, the town needs to pay the district approximately $338,000 by the end of the fiscal year.
The town will still need to pay the school back for the shortfall in fy 2011 and the town’s budget for fiscal year 2013 and future years will need to cover the costs of health insurance for retired teachers over and above its minimum net school spending requirement. Paquette estimated the additional annual expense for the town at approximately $500,000.
Committee Chair Christopher Desjardins asked why DESE audits did not catch this discrepancy a long time ago. Paquette said that as long as a town pays at least 95 percent of its minimum net school spending, it is considered to have met the requirement and would not raise any red flags. He added that prior to fy2011, Medicaid receipts and funds that were carried forward helped the town reach the 95 percent threshold. Superintendent Beach added that there is not one uniform way the EOYRs are reviewed and although the town files an EOYR annually, each report is not audited every year.
Beach reminded the committee that while the town owes the district the money, the matter was out of the district’s hands. “This is between the town and the state,” she said. Beach said the district was not expecting the town to pay in a lump sum and would be willing to work out a payment plan. “We want to make it so the town can meet its obligation in a reasonable fashion,” she said.
New Town Manager Stuart Beckley was at the meeting to discuss the situation with the committee. “This won’t happen again,” he said. He called for more communication between the district and the town and said he wanted the school’s EOYR and the town’s ledgers to be reconciled sooner.
Beckley acknowledged that it will be a challenge for the town to come up with the money it owes the district. “Clearly the special town meeting in the fall would have been different had we known about this issue,” he said. “The Town Meeting in May will certainly be different than anticipated.”
Meehan noted that there is still some discrepancy in terms of just how much the town owes. Beckley said once those figures are finalized, he will work with the district on how the town can repay it. He added that he was “hopeful” the total will be less than $1 million. Desjardins asked Beckley where he thought the town will get the money in an already lean budget. “There is not a lot to be found,” admitted Beckley who said the town will likely need to rely on financial reserves that are generally used for Free Cash and capital projects. “It’s going to take a lot of effort to come up with that money,” Beckley said.