By Dan Hust
NARROWSBURG — September 27, 2002 – Although various administrative reports were positive and Sullivan West’s independent auditor gave high marks to the district, Thursday’s (September 19) board meeting in Narrowsburg was not without its share of the kind of difficulties that weary board members, district officials and the public.
Not Quite Right
“It turns out that none of the generators at the Jeffersonville, Delaware Valley or Narrowsburg campuses were ever designed as backups for heat,” said Turner Construction’s Scott Bridie, who is overseeing Sullivan West’s ongoing $50 million renovations and construction project.
Board members were dumbfounded at that revelation, expressing confusion as to how the generator installers didn’t know of that need.
“Isn’t that the whole idea of having a generator . . . so that the pipes don’t freeze?” said board member Tim Lanese.
Superintendent Michael Johndrow said he was recently told that the generators were designed only to be a backup for the phone system and elevators.
“When we heard this, . . . we were surprised,” he said, recalling that the board and Turner had talked about generators before renovations work began.
“It certainly was an assumption based on discussions with the district,” said Bridie.
“I specifically remember the conversations,” added board member Arthur Norden.
“It was at the meeting where we accepted the bids,” explained Business Manager Keith Menges.
But no paperwork evidently could be found to back that claim up, so Bridie put the generator installations on hold until the matter is resolved.
“We’ve ID’d it in enough time,” he assured the board.
Issues at the High School
While the new high school being built in Lake Huntington is unaffected by the generator situation, Bridie related to the board that a portion of that project is nearly three weeks behind schedule. (The renovations work and several other areas of the high school are either on time or ahead of schedule.)
“We want a roof on Sector A by mid-October,” he said.
Sector A, according to Johndrow, is the cellar, cafeteria and library portion of the high school.
Thus, Bridie is in the process of hiring another masonry crew to increase the complement of the current 18 masons working every day in Lake Huntington. There are also 6-8 laborers and 35 subcontractors on site.
Masons have been laying an average of 125 concrete blocks a day, and that won’t stop during the winter, said Bridie, when a protective plastic coating will be erected around the buildings to allow heat, not rain or snow, to reach workers.
Near the end of Bridie’s report, board members Jerry Triolo and Bill Erdman expressed concerns over other aspects of the high school construction site.
Triolo wondered aloud why the wetlands mitigation effort ended up costing the district $147,000 instead of the estimated $20,000.
Although no answer was given that evening, Johndrow said in a later interview that the wetlands situation “was offset by other issues [that cost less than expected], resulting in a credit of $11,000.”
Following Triolo, Erdman complained that the district had “spent a lot of money for nothing” because the sub-base of the newly poured pavement at the high school site was breaking apart (known as compacting).
Bridie attempted to assure a dubious Erdman that another planned layer of pavement would eliminate the problem.
A Question of Legalities
But the most controversial issue of the evening came during independent auditor Anna Niemann’s report to the board about the just-completed audit of the past school year.
Niemann (of the Mongaup Valley accounting firm Cooper and Niemann) began by saying the district’s records were “in great shape” and its financial condition was “very good,” using graphs to show that Sullivan West managed to parlay 64 percent of its revenue back into direct education of district students (the rest went to various salary, maintenance and insurance costs).
She also pointed out that, while taxpayers are paying roughly $6,000 for every student, the district is spending more than $13,000 per pupil, above the state average. The difference is made up through state aid, which accounts for 48 percent of the district’s income – exactly the same as for tax revenue, which Niemann said is a better situation than in most districts.
But, said Niemann, her conversations with the state education department (SED) indicated that the district erred last year when it spent a portion of a $3 million capital reserve fund.
Put simply, in June of 2000 voters agreed to create the fund, which actually held $1.3 million. Shortly thereafter, SED Commissioner Richard Mills clarified a law stating that monies from a capital reserve fund could only be expended through voter approval in that same year. Since a portion of that $1.3 million went to Jeffersonville’s $5 million renovations in the 2001-2002 school year – more than a year after voters approved it – the school had, according to SED rules, broken the law.
Added to this is the fact that SED also changed the rules for state building aid, saying that, with this new school year, aid will come in the form of 20- or 30-year reimbursements, rather than the traditional lump sum.
So, said Niemann and Business Manager Keith Menges, the board had a choice to make that evening: tell the state through required financial statements that it had unintentionally illegally expended monies from the capital reserve fund last year, thus getting the lump sum of state aid (along with a reprimand); or tell the state through altered bookkeeping records that those funds were borrowed (not from the reserve fund), go back to the voters for approval to utilize the reserve fund, and get reimbursed by the state over the next 20 years or so.
In a later interview, Menges said it was a “mere accounting decision” to make the bookkeeping changes to reflect use of borrowed monies rather than reserve funds.
However, that was not necessary. Through an informal vote consisting of nodding or shaking heads, the board directed Menges to tell the state that the money was spent last year from the capital reserve fund. The only apparent dissenting vote was from Norden.
Callicoon resident Ken Uy, during a later public comment session, was furious over the mistake and the resulting solution.
“This is incomprehensible,” he said to the board. “There’s no way that nobody knew [about the problem when it happened]. If it was me, I’d be asking to sue those fiscal advisors. . . . They’re incompetent. You have to question it!”
Saying Niemann “doesn’t know what she’s talking about,” Uy put forth a third option, saying the board could ask the public to vote on completely liquidating the capital reserve fund and, per SED law, use it to pay off district debt.
School officials, on the other hand, said this was all a result of an apparent miscommunication with the fiscal advisors (which do not include Niemann), but in later interviews, Johndrow and Menges differed on whether to term the resulting situation “illegal.”
“We really shouldn’t have expended those funds,” said Menges, who was treasurer of the district at the time of the reserve fund’s use. “We should report it on the financials [statements]. . . . We didn’t follow the letter of the law . . . so from that point of view, is it legal? I would have to say no.
“But,” he continued, “they [SED] are not going to hold back our finances. . . . It’s a lot fiscally smarter decision to take the repercussions and get that money.”
Menges also questioned dissenters Norden and Uy’s concerns, saying they “haven’t expressed it in a way that is a cooperative and productive manner.”
“It seems very antagonistic,” he said.
Johndrow, on the other hand, said the district was doing nothing intentionally illegal.
“I see this as an interpretation of procedures and policy,” he explained. “We did it under what we considered to be acceptable procedures.”
He said those procedures that led up to the expenditure “are being reassessed,” but he didn’t think the average taxpayer in the district would be upset by the course of the events, since it resulted in what he termed “significant savings” to the district.
“A lot of the accounting procedures are not what you would call legal or illegal,” he explained. “The school is not going to consciously do anything illegal.”
Niemann, for her part, said the matter was more a legal question than an accounting question, explaining that the case which led up to the creation of the SED commissioner’s ruling had to do with a district that was using the capital reserve as a rolling fund year after year – unlike Sullivan West.
At SW, she reminded, “this was a one-shot deal. You have to look at the intent of the law. They [Sullivan West officials] got voter approval to spend the money.”
In Other Business . . .
Elsewhere during the meeting, the board heard that officials are considering a grant program for a solar panel array at the Jeff campus.
Johndrow also told the board that it was “back to the drawing board” regarding contracting out for a building and grounds supervisor, a new position. Evidently, none of the companies that could provide such a person showed up for a pre-bidding tour of the grounds.
Menges told the board that the Norfolk-Southern Railroad, which owns the track that goes through the entire western side of the district, has contested its year 2000 assessments, and a judge has put a restraining order on their requirement to pay, perhaps costing the district as much as $79,000 in lost funds (if the suit is successful).