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The superintendent, head of finance and school board neglected their duties, the analysis finds.

By KELLEY BOUCHARD, Staff Writer September 6, 2007

The Portland School Committee, the superintendent and the school finance director share blame for recent budget troubles in Maine's largest school district, according to an investigator's report released Wednesday night.

Each neglected responsibilities clearly outlined in state law and local policies, which call for close oversight of public school finances, the 40-page report explains.

The committee hired Bryan Dench, a lawyer with Skelton Taintor & Abbott in Auburn, a month ago to figure out how the School Department developed an estimated $1.7 million deficit in the $82 million budget for the fiscal year that ended June 30.

Dench's report, issued during a committee workshop at Portland Arts and Technology High School, follows the July 30 resignation of School Finance Director Richard Paulson and the Aug. 29 resignation of Superintendent Mary Jo O'Connor.

The report attributes the bulk of the deficit to giving raises and hiring employees that weren't in the budget approved by the City Council.

Dench's report shows that O'Connor and Paulson made decisions last fall that led to the deficit and failed to keep the School Committee informed of the full impact of those decisions, which is required by committee policy.

"Apparently, the director of finance and the superintendent either did not think to or decided not to inform the committee or take such action, believing that somehow the department could operate within budget," Dench wrote.

Still, Dench wrote, "neither the superintendent of schools nor the director of finance understood until near the end of the fiscal year in May (2007) that the budget would be exceeded."

The report also shows that some committee members asked questions about the financial impact of hiring more people and giving raises, but their inquiry and oversight didn't go far enough.

"The School Committee approved costs that exceeded the budget in reliance on insufficient supporting information that did not provide a realistic plan to save money elsewhere," Dench wrote. "Until December 2006, the finance committee did not require the superintendent to provide monthly financial statements required by school policy. The superintendent began providing the monthly statements only in May."

Dench's report explains the bulk of the deficit as follows:

When the City Council reduced the school budget's bottom line by $500,000 in May 2006, O'Connor and Paulson agreed to account for the cut by taking $335,000 from $1.6 million that was set aside to cover wage increases and settle employee contracts. They did this without telling Human Resources Director Joline Hart, the district's lead negotiator.

Then employee contracts that were budgeted for an overall 2.5 percent wage increase were settled, with School Committee approval, at 3 percent, resulting in an additional cost of $253,000. These two decisions put the budget $588,000 in the red.

The district then hired the equivalent of 25.7 full-time employees – positions that weren't in the budget – at a cost of $939,000. As a result, shortly after the school year started the budget was already on track to be $1.5 million in the red.

"The superintendent and director of finance did not assure that spending, including changes made during the year, did not exceed the budget," Dench wrote. "When informed by other school officials as early as November 2006 that the costs of personnel were clearly trending substantially in excess of budget, they did not act. Nor did they apprise the School Committee of these facts."

Dench also noted that neither O'Connor nor Paulson informed the committee of an October 2006 audit report that pointed out several deficiencies in the School Department's accounting system.

O'Connor, whose resignation is effective Dec. 28, attended Wednesday's meeting. She declined to comment on the report. Paulson, reached at his home later, said he hadn't seen the report...