The following was delivered as a document to Mario Teisl, Chairman of the SAD 63 Budget & Finance Committee (BFC), at its October committee meeting. Under both the Board's policies and the Right of Information Act, the answers should have been provided within thirty (30) days. However, as the document states, the group requested the answers by the (full) Board's November meeting which took place November 30, 2009.

In Mr. Teisl's November BFC report, dated Saturday, 10/7/09 (when the meeting actually took place Tuesday, 10/9/09) to the Board, he stated, "The first order of business was to reflect on the residents' questions about the 2008 audit report that was given to the Committee at the last meeting. No member of the group was present at the current meeting so we decided to move onto (sic) other business."

It should be noted that three members of the group were present at the November 30th meeting and no offer was made by Mr. Teisl to provide the answers. It should also be noted that on 10/9/09, two members of the group arrived shortly after the 23 minute BFC meeting ended (and before the special Executive Session began). Those two members were Karen Clark, Board member, and this writer, a member of "the group." We arrived as soon as we could get there from the Portland hearing before the Maine Supreme Court. No attempt was made by Mr. Teisl, or any other member of the BFC, to provide any response document. Nor was there any mention by Mr. Teisl at that time that any responses to the document was available, even though he was clearly aware of both Karen's and my arrival.

A caller/reporter from Holden yesterday advised that the Maine Attorney General might be interested in this matter because, in spite of Mr. Hart's opinion, the LAW authorizes the public to have access to ALL public documents, such as school district audit reports, and REQUIRES answers to any questions the public (no matter how large or small a group) may ask re: such audits.

Therefore, for the Public's information, the following questions and "suggestions" were delivered to the SAD 63 Board, via the BFC as was the appropriate procedure. Perhaps members of any RPCs might want to take note as well.

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QUESTIONS REGARDING THE
2007-2008 SAD63 AUDIT

A group of citizens from Eddington and Clifton collectively reviewed the 2007-2008 SAD 63 Audit. The individuals included Eddington Town Manager, Russell Smith; Vice Chairman of the Clifton Board of Selectmen (with full support of that Board), Penny Peasley; Eddington School Board Representative, Karen Clark; Eddington resident Rusty Gagnon (retired multi-million dollar government facility business manager); and Eddington resident Charles L. Wellman, Administrator and CEO of the Eastport Health Center. All of these individuals have experience with government funding and accountability, accounting practices and audit procedures. At the time of the review in question, the 2006-2007 Audit had not been reviewed for comparison. The questions below were developed by the group following the 2007-2008 review.

General Observation:

The overall lack of footnotes to explain significant changes in specific categories hinders understanding of various areas of the report, i.e., the increase of Current liabilities in the amount of $514,783 from 2007 to 2008 (as noted on pg. 8 under the heading of Net Assets for the Period Ending June 30, 2008).

QUESTIONS:

Process Issues:

When was the financial information given to the Auditors? (A specific date please.)

When was the Audit Report completed?

How much is the District paying Brantner, Thibodeau & Associates to conduct the audit and prepare the Audit Report?

How much did the District pay the previous Auditors for the same services?

When will the 2008-2009 Audit Report be started?
(NOTE: The Fiscal Year ended June 30, 2009. Professional standards would expect the
Year-end books to be closed by August 31, 2009. A standard audit procedure where there
are no outstanding problems, especially for an entity the size of this district, should take
no more than four months. Using that measurement, SAD63’s Audit Report for Fiscal
Year 2008-2009 should be completed by January 2010 in order for the School Board’s
Budget and Finance Committee to use that information when preparing the 2010-2011
Budget, and for any school consolidation negotiations.)

If the Auditors project a need for more than four months to complete the audit
process, Why?

QUESTIONS:

Information contained in the Audit Report:

Why aren’t totals spent in 2008 for specific categories the same when reported in different sections of the report?
[NOTE: Compare data reported on pgs 10 and pg 13 – categories: Plant operations and
Maintenance, Transportation, School lunch program, and Contingency and other. The
sums of these categories differ from one page to the other in the amount of $80,314.

Pg. 10 notes (under the first . listing Revenues) federal sources accounted for $425,495 of total revue. When reviewing Assets from Governmental Funds (listed on pg. 14), the group could not identify that amount of money. If placed in the General Fund, it should be so noted and it isn’t. It is not listed in either “Special Revenue Grants” or “Other Governmental Funds”, so where are those funds and how are they accounted for?

Pg. 10 notes (under the first . listing Revenues) shows the same amount of funding from local assessment ($3,599,324) but there is an inconsistency in the amount shown for state sources. Please explain the $5,211,042 difference between the “state sources” referenced on Pg. 10 totaling $5,489,543 and the State Subsidy referenced on Pg. 13 in the amount of $5,211,042 (a difference in the amount of $278,501).

Pgs. 18-19 list a Private Purpose trust for scholarship and other purposes which earned $216 in interest over the year but shows no disbursement during the year. Why were there no disbursements from the trust?
[NOTE: The group did not think this trust should be used for any student outside the
three towns should consolidation take place.]

Under the Summary of Significant Accounting Policies (pg. 20) it was noted “…the District has elected not to apply Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, 1989.” It had been noted that the District does not utilize the generally accepted accounting principles (GAAP). (The explanation offered is that under GAAP the District would show the State’s contribution to the teachers’ retirement fund.) Since the State’s contribution to the teachers’ retirement fund is not a cost to the District’s taxpayers, Why are these basic accounting standards not utilized by SAD63 management?

Related to 5. above: In the Auditor’s cover letter, they write about information on pages 6-11 and 32-33 that …“are not a required part of the basic financials, but yet they are required by GAAP.” Is this limited to the inclusion of the State’s contribution to the teachers’ retirement fund? If this is not the only limitation, please explain what else GAAP requires.

Related to 5. above: Again, on page 4 of the Report, in the last paragraph, the 2nd sentence states, “We have applied certain limited procedures, which consisted principally of inquiries of management.” Please explain what inquiries were made by the auditors and why. Please explain what explanations and instructions were given to the auditors?

Pg. 32 & 33 – Expenditures show a budgeted amount for System administration (not School administration) in the amount of $324,730, but an Actual Amount spent in the amount of $400,981. Why was there an increase in the amount of $76,251 in a year when the Superintendent was terminated?

ADDITIONAL REMARKS:

1. It was noted in 2008-2009 SAD63 Budget and Finance committee meetings, as well as the 2009 May Public Hearing to discuss the proposed 2009-2010 budget, that the District’s business office needs to make the necessary changes in its formatting of various financial documents (monthly financial statements, proposed annual budgets, and any other financial reports and documents) to one consistent format. This will enable all parties to more accurately and clearly compare data for any given area from one reporting period to another. These changes need to be effective immediately.

2. Monthly financial statements should report data for funds received and spent on both month-to-date and year-to-date bases, as well as showing actual totals spent and comparative data for the current month (compared to the same month in the previous year). The monthly financial reports should also include itemized deductions of state funds, deductions from previous year’s overstated budget, donations, etc. An additional benefit would be a column showing the number of students (per school) on a comparative year basis (the current year to the previous year).

3. In 2009/2010, we expect the District Business Office to provide monthly financial reports to the School Board’s Budget and Finance Committee. The reports should also be provided to the Town Managers of Clifton, Eddington and Holden. This distribution should be done by the last business day of the month following the preceding month. This allows sufficient time for the District’s business office to close its month-end books and to produce/distribute the reports.

4. While the Audit Report made only brief mention of the pending lawsuit between the District and the previous Superintendent, it would be beneficial if the Chairman of the School Board would provide monthly status reports of the case (and current costs not being paid by the District’s insurance company) to the Town Managers of Clifton, Eddington and Holden. As stated by the Interim Superintendent, at some point the three Boards of Selectmen are going to have to call special town meetings to address the need for voters to approve necessary funding for any outstanding debt.

5. It was mentioned several times throughout the Audit Report that the District opts not to follow GAAP accounting principles. The Auditors felt it important to point out those areas (see page 11 under General Fund Highlights, the 1st and 2nd indented paragraph; see page 20, the 2nd paragraph; and see page 23, the 1st paragraph).

If the District hopes to consolidate with other schools, it is important our financial records are able to blend in with those record-keeping systems of the other (unknown) schools. It is also possible that it might cost this District less for auditing services if the District managed its books in a manner considered “standard.”

We appreciate the time required to address our concerns; however, we believe answers should be provided by the November School Board meeting. Thank you.

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The very first question re: when the financial data was given to the auditors relates to the fact that the Audit Report was not completed until July 2009 (and reportedly not begun until the Spring of 2009). Standard practices would have had the audit report completed and delivered before May 2009. This would indicate a problem either in the SAD 63 business office or with the auditors. In light of the five months in the first part of 2009 when there were no monthly financial statements provided by the business manager to the School Board, one wonders if there is a relationship between that and the lateness of the audit procedures. Regardless of whatever work may or may not have been done by the SAD 63 business office for the failed RSU, the business manager was paid over $70,000 to do the work of SAD 63 (not to mention the significant bonus she received at the end of the year for the alleged cost savings she was "responsible for.")