Two board members in Lemont-Bromberek Combined School District 113A accused district administrators this week of making unauthorized fund transfers—a charge denied by both the superintendent and former treasurer.
During their monthly business meeting Tuesday night, District 113A board members were presented a tentative budget for fiscal year 2012, which showed a negative beginning cash balance of $329,568 in the Education Fund. Per Illinois State Board of Education guidelines, school district budgets must show a zero or positive balance at the end or beginning of any fiscal year.
In order to “zero out” the cash balance, two resolutions for interfund transfers were presented to the board by former District 113A Treasurer Jay Tovian, who is still serving the district as a consultant to new business manager Barbara Germany.
One resolution was to move $225,568 from the Operations and Maintenance Fund to the Education Fund, while the other was to move $104,000 from the Transportation Fund to the Education Fund.
During the discussion, however, confusion arose over the date on both resolutions. According to the documents, the transfers would be effective June 29, 2011, leading board members to question whether funds had already been transferred without their authorization.
“We transferred money without a board resolution, which is a law,” Board President Mike Aurelio said during the meeting. Pointing out the June 29 date on the resolutions, he said he wanted to know the legality of transferring funds without board authorization.
Per the request of District 113A Supt. Tim Ricker, the board tabled the discussion Tuesday to seek the advice of legal counsel and ISBE officials.
On Thursday afternoon, Aurelio said he believed administrators violated Illinois School Code by making an interfund transfer in June without proper resolutions.
Board Member Al Malley said he believes the situation was caused by "shoddy bookkeeping."
"All you have to do is look at that negative cash balance to see that they spent money they weren't supposed to," he said. "I can't say it's illegal, but it was done without [the board's] knowledge."
Both Malley and Aurelio said they are awaiting the opinion of ISBE and legal counsel to determine the next step.
In phone interviews with Patch both Wednesday and Thursday, Ricker denied that any transfers had occurred. The resolutions were offered, he said, as a way to reconcile the negative cash balance at the end of the 2011 fiscal year.
“Jay Tovian asked [during Tuesday’s meeting] to make the transfer retroactively, but the board did not take action,” Ricker said. “There is no documentation in any ledger that indicates an illegal transfer was made.”
Transferring funds was one of a number of ways the board could have addressed the negative cash balance, Ricker said. The resolutions, which were drafted by district attorneys, were just options, he said.
Due to the allegations made Tuesday, as well as pending litigation for similar allegations, Ricker said he thought it would be best to table the discussion.
A draft of the 2011-2012 budget must be on display for 30 days prior to a public hearing and board vote, which is required by the end of September. The tentative budget will likely be presented to the board again at its Aug. 16 meeting with another scenario for reconciling the negative balance in the Education Fund, Ricker said.
"We still have a balanced budget," he said. "We just need to make sure we dot all of our I's and cross the T's."
In follow-up interviews Thursday evening, Aurelio and Malley maintained their positions that funds were moved without board approval.
"This is what got the district into trouble before," Malley said. "This happened on my watch, so I want to make sure we correct it."
In a phone interview with Patch on Thursday, Board Secretary Cindy Kelly said she did not believe administrators did anything illegal.
“Based on the information I’ve been given, I don’t think anything illegal has taken place,” she said. “The district will be consulting with ISBE and our attorneys to be sure all the appropriate steps are taken moving forward.”
Board Vice President Dave Molitor also said he had not seen any evidence of illegal transfers.
“I’m disappointed by the way this has played out in the public,” he said. “As far as I know, no transfers have been made.”
Board members Lisa Wright, Kevin Doherty and Karen Siston were not available for comment as of Thursday night.
Deb Vespa, ISBE division administrator for business services, said Thursday that she has spoken with administrators regarding the negative cash balance, and is not aware of any fund transfers.
"From what has been reported, nothing has occurred yet," she said. "I don't believe they will end up transferring any funds at this point," she said.
Vespa said she is currently working with the district on other strategies to address the negative cash balance. One option, she said, is the modified accrual method.
Under the modified accrual basis of accounting, both paid and unpaid expenditures are recognized when incurred against the account, but revenues are not recordable until they become measurable and are able to finance expenditures, according to the ISBE website.
"Checks will sit in funds and will show up as payable, but won't be sent out until money is in the funds," said ISBE spokesperson Mary Fergus.
After consulting with attorneys and ISBE officials over the next week, Ricker said the district would put together more information on addressing the negative cash balance.