School budget failures revealed

The Charleston County School District is facing an $18 million budget shortfall, thanks to overspending on everything from botched accounting paperwork to multimillion-dollar salary overexpenditures, according to a memorandum from Superintendent Gerrita Postlewait. The superintendent is expected to present a package of proposed budget cuts and policy changes at the school board’s next meeting Dec. 14 at 75 Calhoun St.

The Charleston County School District vastly overspent on everything from printing costs to charter school payments to teachers for special-needs students, according to an initial report on the district’s $18 million budget shortfall.

The single biggest overspent budget item was a $2.5 million overexpenditure for “teachers and aides for special needs students,” Superintendent Gerrita Postlewait wrote in a memorandum to the Board of Trustees on Tuesday after reviewing an internal audit. She writes that the district’s Department of Exceptional Children Services, which oversees special education, “did not manage staffing budgets” and failed to respond to a shortfall in funding.

The district also made expensive accounting errors, including a failure to file W-2s on time, resulting in a $500,000 penalty.

“There is evidence of a lack of accountability, ownership and discipline for staying within budget,” she said.

Postlewait said in her report that the district failed to monitor and report on its own budget on a consistent basis, and many district and school leaders were unable to track their own divisions’ finances.

The budget shortfall came about because of a $9.36 million overestimation of property tax revenues and $8.75 million worth of overspending beyond the Fiscal Year 2015 budget.

The district also overspent its budget by $2.4 million because it underestimated student population growth by 600 students. District staff initially projected enrollment would increase by 1,300 students but later reduced that estimate to just 500 during budget deliberations, according to the memo. The student population actually increased by 1,100 in fall 2015.

Another major area of overspending was charter schools. The district sponsors nine charter schools and provides funding to them on a per-pupil basis, calculating its payment to the schools using a formula partly based on audited revenue from the previous school year. Postlewait said that, during the budgeting process, the district’s Financial Services department underestimated its revenues and its charter enrollment, resulting in an overexpenditure of $2 million.

The district also overestimated how much money it would save on lapsed salaries — that is, salaries that don’t have to be paid because the district either doesn’t fill a position or lets an employee go during the school year. The district incorporated a 3-percent savings in its salary budget, which school board member Todd Garrett has mildly called “unrealistic.” Garrett said a realistic estimate would have been about one-half of one percent. The district overspent its budget by $1.9 million due to this error, according to Postlewait’s report.

“It was errors built on top of errors,” Garrett said.

Among other blown budget items, the report says the district overspent $1.5 million in Nursing Services, $1.2 million for hiring substitute teachers in a process Postlewait called “inefficient,” $975,000 for expenditures related to insurance premiums, $896,000 for printing and copying costs, and $841,000 in the Guidance Department.

The district introduced an extended-year program for its Innovation Zone Learning Community, budgeted $315,000 for it, and then expanded the program “at an additional, unbudgeted cost of $200,000,” according to the report.

Postlewait wrote that the district asked its Community Education department, which oversees the fee-based after-school Kaleidoscope program, to become self-sustaining, resulting in multiple rate hikes for parents. Still, she wrote, the program carried a deficit balance of $650,000, with $575,000 of unbudgeted support from the General Fund.

“This is an example of a program that the district has continued to sponsor without ensuring there are adequate funds to support it,” Postlewait wrote.

The report indicates that the district was late filing its W-2 forms with the IRS for 2011, leading the IRS to levy a $500,000 penalty against the district. The district paid the penalty in October 2014 and “anticipates a second penalty in relation to the late filing of 2012 W-2s,” according to the report, but school board members said they were not informed of either of the late-filing errors or the resulting fines.

Last week, during a meeting in which the school board accepted the resignation of Chief Financial Officer Michael Bobby, school board members reviewed a draft of an initial external audit. A press release from the district Tuesday says that Postlewait worked with internal and external auditors seeking to “understand causes of the excess expenditures.”

The school board has also accepted a proposal for a forensic audit of human resources and payroll for the past three fiscal years, although details about the audit and the firm chosen to conduct it have not yet been released.

School Board Chairwoman Cindy Bohn Coats said she has been satisfied with Postlewait’s action on the budget shortfall so far.

“For something like this to get dropped in a new superintendent’s lap, I imagine it can be overwhelming, but she has handled it calmly, consistently, fairly and openly every step of the way,” Coats said.

Postlewait is expected to propose budget cuts and policy changes in response to the funding shortfall at the Dec. 14 school board meeting. She said last week that she will ask district finance leaders to present monthly updates on spending and will push to improve information-technology systems to allow more precise tracking of district spending.

Bobby, who also served as interim superintendent for nearly a year before Postlewait’s arrival in July, wrote in a prepared statement about his resignation last week that he was leaving in the interest of “sparing the district from any continuing public controversy.”

“I leave with the knowledge and confidence that the district is better because of my service to it,” Bobby wrote.

Dot Scott, branch president of the Charleston NAACP, said she was “speechless” when she saw the report from Postlewait. She said the district should not have agreed to pay Bobby six months’ salary and benefits after his resignation, a severance package that she called a “golden parachute.”

“Not a dime of the district’s money, the taxpayers’ money, should go to Mr. Bobby,” Scott said.

Reach Paul Bowers at 843-937-5546 or twitter.com/paul_bowers.