The agreement, reached on Wednesday, is an interim solution to a vacancy created when School Finance Director Richard Paulson resigned on Monday amid controversy over an estimated $2.5 million budget deficit.
The city's oversight of school finances could last through December and may become permanent if Portland officials move ahead with a proposal to combine city and school finance offices.
Also on Wednesday, the School Committee voted 8-0 to hire a lawyer to investigate the causes of the deficit and issue a report within 30 days.
The investigation is expected to cost as much as $20,000 and will be paid from the committee's $35,000 contingency fund.
"I'm very interested in having a keen understanding of how we got into this," said committee member Lori Gramlich, who called for the investigation.
The committee plans to hire Brian Dench, a lawyer in Auburn who has expertise in school finances. However, members first want to make sure the contract doesn't have to be put out for bids.
School officials have been wrestling publicly with a growing deficit in their 2006-07 budget since May. The gap includes $1.7 million in overspending and an $850,000 revenue shortfall.
Paulson resigned after it came to light that about $900,000 in overspending occurred without his knowledge because expenditures weren't recorded when the school department's accounting manager was absent for extended periods.
Part of the deficit will be covered by the school department's remaining $1 million in surplus funds.
The remaining $1.5 million is considered a cash deficit that probably will be covered by the city's $20 million reserve fund. It must be repaid within two years to maintain Portland's high financial rating, which is important when it borrows or invests money.
The School Committee's finance subcommittee learned about City Manager Joseph Gray Jr.'s offer to assume management of school finances Wednesday night.
Assistant City Manager Anita LaChance, Finance Director Duane Kline and Budget Director Ellen Sanborn explained the plan during a subcommittee meeting at Portland Arts and Technology High School.
"We have a full staff of professional accountants and we're ready to start tomorrow," Kline said.
Under the plan, Paulson won't be replaced for the time being and the job won't be filled at its current level in the school department.
The city's finance staff will help Superintendent Mary Jo O'Connor hire a qualified accounting firm to complete required financial reporting to the state Department of Education, which has granted Portland an extension because of Paulson's resignation.
The subcommittee and O'Connor welcomed the help.
"It's absolutely necessary at this point because it's not my area of expertise," O'Connor said.
She said the "trained eyes" of the city's finance staff may be able to identify sources of money in school department accounts that are available to reduce the deficit.
City and school finance offices are legally part of the same entity and were combined as recently as the 1980s, officials said.
Sanborn will oversee the school department's finance staff, which consists of an accounting manager and three clerks.
Sanborn said her staff will help the school department close out its books for the year that ended June 30 and will learn about the school budget for the current year.
"Our focus right now is to find out where you're at and get you back on track," Sanborn said. "We'll do our very, very best to make sure (a cash deficit) doesn't happen again."
Sanborn and the other city administrators promised that the School Committee's role in developing budgets and overseeing school spending will remain unchanged.
However,...
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