A fund set up by the Board of Education last summer with leftover money from a self-insurance program could lead to confusion if not addressed, an auditor told the Board of Aldermen Thursday.
David Cappelletti, of Woodbridge-based Levitsky and Berney, PC, who raised the issue while reviewing an audit of the city’s funds, said that while the Board of Education acted within its own rules to set up the reserve account, which currently has $212,000 in it, he recommended that the city’s aldermen “at least consent” to what the school board did.
The potential problem with the new account, according to the auditor:
“In my history what happens to reserve funds … is they sit there for 10 years, then all of a sudden we forgot what that was used for,” Cappelletti said. “I just think it’s something the Board of Aldermen should be aware of.”
During the public portion of Thursday’s meeting, Board of Education Finance Director Al Cameron said that the surplus came about after the school board decided to be self-insured for dental coverage last year.
In deciding how much money to budget, Cameron said the best “guesstimate” the board could make was to allocate what they had paid the previous year.
When the account was still $212,000 in the black at the end of the year, Cameron said, Board of Education members asked him to reach out to other self-insured school boards for advice.
He said it is “pretty common” practice to create something called an “internal service fund” for years when the money allocated in an annual budget for dental expenses may not cover claims.
“There is a resolution and the resolution limits what it can be spent on,” Cameron said.
At a school board meeting in June 2011, members voted unanimously to create the account “to fund future liabilities for self-insurance.”
Mayor Mark Lauretti indicated someone needs to keep a close eye on the money, because the school board “constantly” alters such pledges.
“The Board of Education has a long history of establishing resolutions and changing them,” he said. “As they do with budgets … through transfers.”
Earlier, during Cappelletti’s presentation, Lauretti tried to press the auditor on the question of who controls the funds.
“They’ve taken $200,000 and put it in a separate bank account. Under whose authority have they done that?” Lauretti said. “For the city of Shelton, the fiscal authority is the Board of Aldermen.”
“I would say it’s the Board of Aldermen’s funds,” Cappelletti said. However, the auditor noted that since the account is managed by the school board, “in reality the Board of Education is the authority because they have the cash.”
Board of Aldermen President John F. Anglace, at the end of the discussion, said the board should ask its corporation counsel “to look at this and give us an opinion” but no action was taken on the matter Thursday.