Why Should Delaware Care?
Appoquinimink School District residents will pay 10% higher school taxes this year, costing the average homeowner more than $100 more in taxes, after the school board approved the hike amid an accounting scandal. Frustrated residents have sought answers as to how the errors occurred, and a public audit could provide them.
Less than a day after the Appoquinimink Board of Education approved a 10% local tax rate increase to rectify major accounting errors, three New Castle County Council members who represent the area are calling for a state audit of the district.
Councilmen David Carter, David Tackett and Kevin Caneco, who represent the Middletown-Odessa-Townsend area served by the Appoquinimink district, sent letters or made public calls for State Auditor Lydia York to investigate how such significant accounting errors occurred in one of Delaware’s largest school districts, including why checks-and-balances meant to ensure the integrity of its books failed.
They also decried the lack of transparency from the district, which first publicly disclosed that it had identified nearly $8 million in accounting errors that would jeopardize the financial future of the district that serves more than 13,000 students on June 25. Less than two weeks later, the school board voted to approve a 10% increase – without voter approval under the terms of a first-in-a-generation reassessment process – after months of telling the public that wouldn’t be necessary.
As of Thursday, the district’s website and social media still did not share any public notice of the impending tax hike or the explanation for it. Before the board’s vote Tuesday night, when most of the public said they learned of the proposal that morning due to reporting by WDEL, school board Chair Richard Forsten questioned why the media hadn’t reported it earlier.
“The lack of transparency and incompetence by the Appoquinimink School District is astounding. Today we need an explanation of why they are misleading the public or [Superintendent Matthew] Burrows should step down,” Caneco said in a Wednesday statement.
What happened?
In recent weeks, the school board learned that a projected $7.9 million savings balance for the fiscal year that ended June 30 had essentially been a mirage.
Numerous accounting errors, including a failure to notice that May had an extra pay period and that extracurricular pay to teachers and coaches hadn’t been applied, as well as funds for summer school programs having been appropriated to ineligible federal funds, left Appoquinimink facing a significant budget deficit.
The district’s former finance director, Eric Loftus, resigned last month, but officials have declined to discuss that departure.
They said they are nearing the replacement hire for Loftus, who oversaw Appoquinimink’s accounting for nearly the last seven years.
Reportedly, both the school board and a Financial Advisory Committee, made up of independent community members with financial backgrounds, had reviewed the monthly cash flow statements and also missed the errors.
In response, Appoquinimink Superintendent Matthew Burrows undertook $2.5 million in district-wide cuts to try to reduce that potential burden over the final weeks of the school year. That included the reduction of a few dozen open positions, reassignment of district staff to school-based roles, and cuts to both district and individual school budgets.
In the end, Appoquinimink ended the fiscal year with a cash balance of about $3 million.
That put the district, which serves more than 13,000 students, in a precarious situation though, because state regulations require districts to have at least two payrolls worth of cash on hand at year’s end. For Appoquinimink, it equates to $4.2 million.
Failure to meet that threshold could risk putting the school district into financial receivership of the Delaware Department of Education, where state officials would overtake financial decision-making, including the setting of tax rates.
To make matters worse, the district had already planned a Fiscal Year 2026 budget built on the now-faulty projections. Failing to find a way to bring in roughly $5 million in new funding would force the district to likely cut dozens of additional classroom positions, Burrows told Spotlight Delaware.
All of these factors came to a head Tuesday with the fact that state statute requires school districts to report their tax rates to counties by the second Thursday in July – in this year’s case, it was July 10 – in order for the counties to prepare tax bills in time.
District, county place blame
Tackett criticized efforts by the school board to deflect questions about the accounting errors by pointing to delays in New Castle County’s assessment of new property development over the past year.
While new projects are typically assessed within weeks of issuing certificates of occupancy – and therefore placing them on to tax rolls that would benefit school budgets – New Castle County was delayed by months in those assessments as it undertook the first comprehensive reassessment of all property for the first time since the 1980s last year.
Forsten, the school board chair, highlighted that the delayed assessment of Middletown’s Target store cost the district about $90,000 last year. Delays to assessments of some other smaller commercial projects along with newly built homes would have similarly delayed payments to districts.
In a statement, Tackett said he was “disappointed the Appoquinimink School Board chose to blame New Castle County, with a false and misleading statement in their decision to increase taxes coupled with the announcement the district mismanaged millions of dollars.”
“I urge the school board to prioritize fiscal responsibility and transparency. Before asking communities to bear the burden of higher taxes, we must ensure that every dollar is being spent wisely and efficiently to truly benefit our students,” he added.
Forsten said Tuesday that he was requesting an independent review of what happened with the accounting errors and hoped to release a public report on its findings by early this fall. Involved in reviewing the books would be Scott Kessell, a former Brandywine School District and Red Clay Consolidated School District chief financial officer, and Chuck Longfellow, a former Appoquinimink finance director.
“There were major mistakes that, for whatever reason, were made that weren’t picked up in our checks-and-balance system,” Forsten said.
Carter told Spotlight Delaware that he has spoken with Superintendent Burrows and feels certain that no money has been stolen, but the lack of quality controls around the district’s accounting has him concerned.
He wrote a letter to Auditor York’s office requesting that she review the district’s books and funds, as well as the reasoning for tax hike shared with the public.
A spokesperson for York’s office confirmed Wednesday that they received the requests and were reviewing internally whether it would undertake the audit.
Carter disagreed with Forsten’s approach to have the district lead the review.
“I called for the audit because, if you do it internally like Rick Forsten said, nobody’s going to believe you. You have to have an external audit look at it to give the public confidence,” he said.