Review: Financial emergency for Benton Harbor schools

BENTON HARBOR, Mich.--- An independent review team determined a state of financial emergency for Benton Harbor Area Schools and sent a report to Gov. Rick Snyder for review.

“They're not on life support, but they're in trouble,” said Berrien County Treasurer Bret Witkowski, who served as a reviewer.

Witkowski was part of a committee that completed nearly 10 hours of interviews with key players within the school system. The team also reviewed the district’s financial records over a period of a few weeks.

The deficit reached $15.5 million in June 2013 and that takes into account a $2 million emergency loan that the district is struggling to pay back.

“The report contained a good bit of information detailing the financial situation in the school district,” said Terry Stanton of the Michigan Dept. of Treasury. “That information will be important for the governor to consider as he looks to make his own determination or if he determines that there isn't a financial emergency.”

Witkowski said Benton Harbor Area Schools have done a good job balancing their budget in recent years, but the period from 2006 to 2010 created a deep hole of debt.

“Those four years were absolutely disastrous,” said Witkowski, who noted that enrollment numbers had been dropping. “They didn't cut quickly enough, they were always behind."

He said the district went from having a small surplus to over $14 million in debt in 4 years.

Stanton said August 11 is the deadline for Gov. Snyder to make his recommendation.

“One of the reasons we’re getting this to the governor as soon as we did was to make sure these kids and their parents don’t have doubts that the school will open after Labor Day,” said Witkowski.

He said getting the ball rolling now will mean the district’s financial condition will likely have no impact on the upcoming school year in Benton Harbor.

RELEASE:

An independent review team concludes that a financial emergency exists in the Benton Harbor Area Schools.

Michigan Gov. Rick Snyder by law has 10 days to consider the review team’s report and reach a determination on the district’s financial condition.

The team’s report indicates numerous conditions led to the determination that a financial emergency exists in the district, including:

· According to the district’s 2013 fiscal year financial audit, the cumulative general fund deficit decreased by 3.6 percent, from $16.1 million on June 30, 2012, to $15.5 million on June 30, 2013. However, the net change was primarily the result of a $2 million emergency loan. Without the loan, the cumulative general fund deficit would have increased 8.8 percent, from $16.1 million to $17.5 million.

· School district officials violated Section 17 of Public Act 2 of 1968, the Uniform Bud­geting and Accounting Act, by permitting expenditures in excess of budgeted appropriations.

· According to the district’s 2013 fiscal year financial audit report, general fund liabilities as of June 30, 2013, were $21.4 million, while general fund assets totaled only $5.9 million.

· As of June 30, the district owed more than $3.6 million in total accounts payable to various vendors, including more than $1.3 million that was more than 211 days past due.


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