Report on $1M shortfall says Pembroke school officials failed to foresee enrollment drop

  • FROM LEFT: School board member Dan Driscoll, Co-Superintendent Patty Sherman and SAU 53 business administrator Amber Wheeler attend a special budget committee meeting at Pembroke Academy on Nov. 2, 2017. Elizabeth Frantz / Monitor file

Monitor staff
Wednesday, February 21, 2018

Pembroke administrators’ failure to anticipate students’ leaving the district led to a surprise $1 million budget shortfall that caused tax rates to skyrocket, an audit by an outside consulting firm found.

School officials instead projected tuition revenues for the 2017-18 school year based on enrollment figures from 2016, the audit says.

“There was nothing taken into account for the potential of students moving, attending private schools and being home-schooled,” a report submitted to the Pembroke School Board by the Tilton-based Youth Education Tomorrow consulting firm said.

The school board commissioned the report, setting aside $10,000 for it in mid-December after a $1 million shortfall discovered at tax-setting time spiked the tax rate and plunged the district in a budget crisis.

The consultants were tasked with figuring out why administrators were so far off in projecting tuition revenue to Pembroke Academy from other towns in SAU 53, and to investigate whether the district was doing all it could to capture all the state and federal special education reimbursements possible.

The five-page report, written by YET consultants Bill Lander and Michael Martin, both former New Hampshire school administrators, found that the budget assumed 468 tuition students would attend Pembroke Academy in 2017-18. At tax-rate setting, there were only 406.

The consultants included a series of recommendations for better budgeting in the future. They suggested tracking how many students were typically lost between when the budget was first developed to tax-rate-setting to build more conservative assumptions into projected tuition revenues. They also suggested Pembroke not rely on projected enrollment numbers from sending towns, since those towns tend to overestimate tuition payments in order to be conservative with their budgets.

Dan Driscoll, the school board chairman, said the SAU’s business administrator “didn’t know that there was a buffer already built into (enrollment projections) from the sending towns.”

“I think a lot of that has to do with her level of experience doing this type of thing,” he said.

The district has also historically calculated tuition rates by simply increasing the prior year’s rate by 5 percent. That’s not the formula outlined in the AREA agreement that should govern how tuition is apportioned to Allenstown, Chichester and Epsom, the consultants write.

YET consultants also found that, by and large, the district was capturing the special education reimbursements it was owed. But they noted that certain service providers hadn’t been doing the necessary paperwork to get the district some money back. And administrators, they wrote, needed a better way to keep track of students and their extra support.

“A better identification and tracking system by the special education team needs to be in place. It would be imperative to provide training for special needs personnel,” the report states.

YET also suggested the district create an expendable trust, funded by surpluses, to help dampen the effect on the tax rate in the event of another shortfall.

Driscoll told a crowd at a board meeting Tuesday night that the audit would be posted to the district’s website and that Lander would be available at the next school board meeting, on March 6, to answer questions from the public.

They could get an earful. On Tuesday, after Lander gave a brief overview of the report, a few residents stood up to speak.

“The reason a lot of people are in this room was over the nearly $1 million fiscal mismanagement,” resident Mark Dumas said. “The audit that was requested was a financial audit. This was not a fiscal audit. This doesn’t even remotely meet the requests of the people. So I don’t know what we paid for. Roughly, we just heard what we already knew.”

But Driscoll said the school board, through its attorneys, specifically sought out companies like YET. The district already does an annual financial audit, he said, as required by law. And audits can only check that accounting was done correctly and legally. What the board sought, and what it believed residents wanted, he said, was an understanding of why the district’s assumptions were so off.

“(A financial audit) wouldn’t delve into what happened in the process,” he said.

Driscoll also said the school board had released a “scope of services” outlining what questions the report would answer ahead of time and didn’t receive any feedback on it.

The board is already working on implementing its recommendations, he said, although certain ones, like the expendable trust, would need voter approval.

“We really were not surprised by anything in this report,” he said.

Driscoll said the board’s attorneys reached out to YET and the Meredith-based Municipal Resources Inc. to see if they could do the report. Only YET said they could produce the work within the required time frame, he said. The company estimated the work would cost about $5,000, he said, but hadn’t yet sent an invoice.

(Lola Duffort can be reached at 369-3321 or lduffort@cmonitor.com.)