Few answers over district's $3.3m deficit

NASHUA – While city officials questioned how the school district spent $3.3 million more than its budget, the city’s former superintendent offered few answers Monday.

Christopher Hottel, now superintendent of the North Andover, Mass., sent a written response and did not return phone calls for comment. He did not indicate whether he or former business administrator Jim Mealey were aware of a deficit prior to leaving Nashua for similar positions at the end of June, nor could did he offer any substantial explanation for how the shortfall occurred.

Instead, Hottel criticized the city’s outdated accounting software and lack of control over money intended for education.

School officials discovered the deficit last week as they completed year-end accounting, which revealed the district overspent its $88.5 million budget for the 2009 fiscal year by $3.3 million. The 2009 fiscal year covered the 2008-09 school year and ended June 30.

Members of the Board of Aldermen and the Board of Education will meet tonight to discuss the situation. The meeting will start at 7 p.m. at Nashua High School North.

In Hottel’s statement, the former superintendent cited what he described as antiquated accounting software being used by the city and the district’s lack of control over state funding for education.

Hottel said the city’s accounting system would produce expenditure reports with wrong information or with information that would change without notice and could not respond to budget and payroll cycles.

“The problem shows clearly the crucial importance of the Mayor’s focus on acquiring a robust data system for accounting,” Hottel wrote.

To continue to use the same system “is asking for trouble,” he said.

Hottel was referring to Mayor Donnalee Lozeau’s proposal for a $7.5 million bond to upgrade the city’s financial database, which aldermen approved last week.

Hottel also cited lack of control of state funding, such as catastrophic aid for special education, as a reason spending problems may have occurred.

Alderman-at-Large David Deane questioned Hottel’s logic.

“Why would software and a charter provision have anything to do with them spending too much money?” asked Deane, one of the most fiscally conservative aldermen and a former chairman of the budget review committee.

“How come it never happened before?” Deane asked. “Mark Conrad had the same software here for 10 years.”

Conrad is the incoming superintendent of schools. He worked as the Nashua School District business manager for 10 years before leaving in 2006.

“Show me the numbers,” Deane said. “I haven’t seen anything.”

Interim Superintendent Ed Hendry said the district did not have a specific breakdown of where the overexpenditures occurred.

Last year, city officials warned that the school district would have to keep an extremely tight budget after a new teachers contract was approved, warning average raises of 6 to 7 percent for teachers would cripple spending for other programs. The school district was facing $3.1 million in contracted raises for the year, $2.36 million of which was to pay for salary increases for teachers.

“Mr. Mealey is going to have one hell of a management problem,” Alderman Fred Teeboom said at the time.

The current deficit is a result of “overexpenditures in salaries, special education expenses and accrued leave payouts for retirees,” according a memo sent from Mayor Donnalee Lozeau to the city’s financial office over the weekend.

Hottel, who was superintendent in Nashua since 2006, left Nashua to become the superintendent in North Andover. When he left, Chief Financial Officer Mealey left with him to take a similar position in North Andover. Mealey did not return a phone call Monday.

Several city and school officials said Mealey has been working with the district to try and figure out what happened.

The shortfall presents two problems that need to be addressed, said Alderman-at-Large Brian McCarthy, who chairs the budget review committee.

One problem, McCarthy said, is the spending shortfall in the budget for fiscal year 2010, which began July 1.

“The other one is to figure out where the money that has already been spent in 2009 is coming from,” McCarthy said.

McCarthy said he doesn’t expect any action to come out of tonights’s meeting of the aldermen’s Budget Review Committee, which members of the board of education will attend.

“I wouldn’t expect that we’d know enough by (Tuesday) night to do anything about it,” he said.

The book on 2009 spending is closed in July, with an audit coming in August and September.

“There’s time to figure out the solution,” McCarthy said.

One possible solution is for the board of education to present a series of cost-cutting measures that would take care of the shortfall, McCarthy said, adding, “That’s not likely to happen.”

More probable is that finding a solution will require work by the board of aldermen, he said.

The board will have to decide how to cover the funding shortfalls “and make sure it doesn’t happen again,” McCarthy said.

In the event of a budget deficit, there is a spending cap provision in the city charter that requires an “automatic, equal and across-the-board percentile cut” among all departments, unless overridden by the aldermen.

Deane agreed with McCarthy that board members would want to vent frustration during the budget review committee meeting.

“Tomorrow night will be interesting,” Deane said.

“It’s a problem we have to correct somehow. They’ve already spent the money. You can’t change that fact,” Deane said.

Bob Sherman, president of the Nashua Teachers Union, said the first he heard of the deficit was in the newspaper on Monday. He said he would be attending Tuesday’s meeting to get some insight into the problem.

Lozeau already said she would be vetoing the $2.21 million approved by aldermen last week to pay for a security systems upgrade across the school district, she said.

The money was going to come from the city’s school capital reserve fund, but Lozeau said given the circumstances, it doesn’t make sense to fund such a substantial project until last year’s budget can be met.