School owes town $37,000 in lunch money

NORTH CANAAN — North Canaan Elementary School has agreed to settle a debt with the town that falls into a gray bookkeeping area.

The debt sheds some light on the somewhat complicated financial relationship between the two entities. The school sets its own budget, but needs final approval from the Board of Finance before it is presented to voters at the annual budget town meeting.

The town also owns the school property, and is ultimately responsible for the school’s fiscal well-being.

For several years, the school’s lunch program was running in the red — and the school ran up a debt to the town of $37,000.

That amount wasn’t a true debt. It was an accumulation of lunch program expenses. While the program was running a deficit, wages and vendor bills were covered by moving funds from other Board of Education budget line items.

But the annual shortfall was duly recorded on the town’s books. The auditor (who recently completed an annual scrutiny of financial records up to June 30, 2008), called it a “paper deficit.�

So, the answer to paying off this “virtual debt� is to use real funds, but keep them in the same pot. The auditor recommended using part of last year’s school budget surplus, which has been returned to the town from the region, to apply to the virtual debt to cancel it out.

The six towns in the Region One School District share regional education costs. If the region comes in under budget, funds are credited back to the towns.

It should be noted that a school budget surplus cannot be kept by the school, or applied to the next year’s budget.

What is not spent on budgeted items is either returned to the town’s general fund, or needs finance board approval to be used for a capital expense.

Schools will sometimes ask to “pre-buy� things such as supplies or fuel oil to get a jump on the next fiscal year.

Although the surplus regional funds were returned to the town, and are no longer under school board control, the board was asked to consider a motion to approve covering the debt with the surplus funds.

The request came in a report at the November Board of Education meeting from Principal Rosemary Keilty, who was not able to attend the meeting due to illness. In her report, she said she had met with the auditor and Region One School District Business Manager Sam Herrick  on the issue.

Board members initially wanted to table the matter so they could get a better understanding of the issue. Board member Karen Riccardelli, who is an accountant, was unable to offer an explanation.

But the report explained that there would be no real expenditure of funds; this was a “housekeeping matter that should be cleaned up.� The board voted in favor of the action. Beyond that, there were no other issues found by the auditor.

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