District 113A Awaits Answers from State Board on Addressing Negative Cash Balance

The budget process for the upcoming fiscal year will be delayed another week in  as board members await direction from the state on addressing a negative cash balance in its Education Fund.

During a special meeting Wednesday night, District 113A board members and administrators revisited several controversial financial issues that were tabled during last month's board meeting, including debate over the 2011-2012 tentative budget and allegations of unauthorized fund transfers.

In moving forward with the budget, District 113A Supt. Tim Ricker said he reached out in recent weeks to business services administrator Deb Vespa at the Illinois State Board of Education to request written instructions on how to reconcile a negative cash balance. As of Wednesday, however, Vespa's only response was that the district should consult its auditors and attorneys.

On July 19,  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 loans 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 Aurelio and Board Member Al Malley to question whether funds had already been transferred without their authorization.

In follow-up interviews, Ricker and Tovian denied any transfers occurred.

Per the request of Aurelio, attorney Thomas Melody attended Wednesday's meeting to address the board on the Illinois School Code's language on interfund loans, which are permitted through board approved resolutions.

Melody said it was his understanding that the district needed more interfund loans than were approved at the board's June 28 meeting—a total of $950,000—to repay tax anticipation warrants. He was under the impression that Tovian made another loan, then approached the board at a later date to sign retroactive resolutions.

"My advice to Mr. Aurelio was that sometimes that happens, it's not the best way to proceed," Melody said. "It's not like there has been a misappropriation of funds or anybody has stolen anything or anything like that."

Ricker again denied that any interfund loans were made without the authorization of the board. Melody said even if that were the case, "it's not an ideal way to proceed, but it's OK."

Tovian said the resolutions were only offered as an option for reconciling the negative cash balance at the end of the 2011 fiscal year.

"The funds were not transferred," he said. "It was all pending board approval. We even provided a revised (cash balance sheet) in the budget to show the impact of making those additional loans. But nothing was done."

In order to meet the ISBE rules for budget presentation and eliminate the negative cash balance, there needed to be an entry prior to June 30 so the ending fund balance would be zero or positive, Tovian said.

Malley echoed his statements from last month, questioning how the negative cash balance came to be and where Tovian got the cash to make approved payments.

According to Tovian, some checks approved during the June 28 meeting were held until July 7 because there were not sufficient funds to present them for payment. The issue will be addressed with auditors, he said.

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. Following further discussion with state officials and auditors, a 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.