Steve Sherlock’s Analysis of the Forensic Report that resulted from the audit of the

Franklin School Departmentfor FY 2005, 2006, 2007

Based upon the presentation at the Joint Town Council & School

Committee meeting 1/9/08 and the Forensic Report itself

Updated in October, 2008 with the latest information available. Blue text indicates the updates or information added.

Terminology

• DOFO – Director of Financial Operations, this was the title for the School Department finance person who was let go as a result of the audit.

• Sp Ed – abbreviation for “special education”

Timeline – FY 2006

FY 2006 = $400K deficit from Sp Ed expenses and unbudgeted hiring

Sep 2005/ Oct 2006

Deficit covered with transfer of Sp Ed Circuit Breakers funds

Deficit was created by prior Superintendent, revealed in W Ogden memo to J Nutting 10/26/06. According to this memo the deficit was projected as early as Sep 2005

Transfer made by DOFO with approval of Town Comptroller; MA Dept of Rev did not reverse in accounting for “free cash”

Auditor has citations in report for this transfer being illegal, although admitted during the presentation that it is “open to interpretation”

Deficit found during audit of FY 2006, discussed with Town Council (6/20/07) but not discussed with School Committee

Date not available in report

Timeline – FY 2007Oct 2006

Deficit created by • Carry forward of the FY 2006 deficit• Use of “Negative line” items

Jan 2007• Double booking Medicaid $300K

Deficit acknowledged in Oct 2006 memo; spending freeze commences and recovers $663K

$274K deficit covered by Town Council Jun 2007

$598K deficit covered by Town Council Dec 2007

Auditor has citations in report for this second transfer also being illegal

Forensic report covers audit of FY 2005, 2006, 2007 reviewed with joint Town Council and School Committee meeting 1/9/08

• Town Comptroller finds transfer of 2007 expenses to 2008 budget in October 2007• Town election held 11/6/07• Announcement of additional FY 2007 deficit made just the day Thanksgiving 2007

Oct 06 Jan 07 Oct 07 Nov 07 Jan 08Feb 07 Jun 07 Dec 07

Approached report with 3 questions

1 - Does the explanation of the deficit make sense?

2 - Do the recommendations address each of the issues raised in the report in an appropriate and sustaining manner? (Will these steps prevent future issues?)

3 - Are there any questions that were not answered by the report?

Q 1 – Does report explain deficits?

Yes, for the fiscal years 2005, 2006, 2007

FY 2004 and prior are not covered

FY 2008 was reviewed by the interim DOFO, there were no additional problems found. The FY 2008 budget year closed within budget.

Q 2 – Do the recommendations cover the issues raised?

Assuming the negative lines have been resolved, appropriate cost centers remain to be set up, along with reports to monitor this activityNegative line items were removed, cost centers were

set up by school, additional reporting was established

Qualified personnel remain to be sourcedNew Director of Finance started in April 2008

More visibility and accountability will help to provide insights to what has been apparent to some since Sep 2005

Q 3 – Do questions remain?

1. Why not audit FY 2004 and prior? Unanswered

2. How long have negative line items been in use? Unanswered

3. Why use the current auditors to conduct this forensic report? Unanswered

4. Why wasn’t this real deficit announced before the election? Unanswered

5. How is the $598K really going to be handled?• The money was taken from “free cash”

6. What surprises do the FY 2008 budget hold?• None, the year finished within the budget

7. How do you restore trust in the eyes of the Franklin taxpayers and voters? Ongoing task

Important links

• The full audit report can be found on the Franklin (MA) Schools page or via this direct link (PDF)

• The audio recording of the Joint Town Council and School Committee meeting held on January 9, 2008 can be found on the Franklin Matters web site.