Why Should Delaware Care?
As Delaware’s second largest district by enrollment, the Appoquinimink School District serves more than 13,000 students in the Middletown-Odessa-Townsend area. Earlier this month, experts laid out how they believe the district found itself in an accounting snafu, and listed the recommendations they believe will help the district get back on track.
Two finance experts hired by the Appoquinimink school board blamed the district’s recent error-induced budget deficit on a lack of oversight of its chief financial officer, largely matching conclusions reached by the Delaware state auditor.
The multi-million-dollar accounting failure ultimately resulted in a tax hike to offset the missing funds, drawing the outrage of Middletown-area residents and calls for district leaders to resign.
In a notably calmer Oct. 7 board meeting, Scott Kessell, a former Brandywine School District and Red Clay Consolidated School District chief financial officer, and former Appoquinimink Finance Director Chuck Longfellow presented their view of what happened with the accounting errors.
Kessell and Longfellow, hired by the district to conduct an external review, ultimately attributed Appoquinimink’s financial woes to a lack of proper document monitoring and budget planning, among other observations.
During the 45-minute presentation, Longfellow described what he said was too much reliance on one person, which resulted in a “single point of failure.”
Though Longfellow stopped short of naming anyone specifically, State Auditor Lydia York previously faulted the school board, superintendent and the district’s financial advisory committee for not sufficiently questioning and reviewing the work of Eric Loftus, the district’s former finance director who resigned in June shortly after the errors were identified.
How did the district get here?
In May, the school board learned that a projected $7.9 million in savings for the fiscal year that ended June 30 had essentially been a mirage. In reality, the district – which had a $232 million operating budget – only had about $3.1 million in the bank.
It was a result of a failure to record several key expenses, including paychecks that went out during an extra pay period in May, pay to teachers and coaches for extracurricular activities that hadn’t been applied and a misapplied federal grant for summer school costs.
As an immediate response, Superintendent Matthew Burrows cut about $2.5 million from districtwide expenses during the final weeks of the school year by reducing a few dozen open positions and reassigning central district staff.
The district ended the fiscal year with a cash balance of just more than $3 million. It also ended without a finance director, as Loftus, who had overseen the district’s financial operations, resigned in June.
After the end-of-year cuts, school board members voted unanimously in July to approve a 10% increase for the portion of residents’ property taxes that funds schools to help offset the financial miscalculations.
A day after that July board meeting, New Castle County Councilmembers David Carter, David Tackett, and Kevin Caneco – who represent Appoquinimink’s Middletown-Odessa-Townsend area – called for State Auditor Lydia York to investigate the accounting errors.
On Sept. 6, York released a 14-page report, revealing “failures in budgeting, reporting, and review that have resulted in Appoquinimink running large deficits for several years running.”
The audit didn’t find any evidence of theft or fraud.
Burrows gave a presentation during a Sept. 9 board meeting, during which he said the district would require increased financial training for the board, as well as for a citizen-led committee that oversees district finances and various other district officials.
Burrows defended the district in his presentation, saying officials alerted the public in June to the financial snafu, weeks before they voted to raise taxes. He also said the district learned of the problems a month earlier in May, and then only learned “the full impact of the budgeting errors” during a June 25 meeting.
What comes next?
As the district moves forward, Longfellow said it should establish procedures with multiple levels of preparing, reviewing and approving financial documents.
Kessell recommended the district require all changes to its budget after it is approved be voted on by the superintendent and board of education.
According to his report, this procedure had not been standard practice within the district. Loftus had edited the district’s budget documents and monthly financial reports within the state’s reporting system without seeking board approval, Kessell said.
He also recommended the board establish a policy that requires the superintendent’s signature on all contracts.
Despite having a discretionary budget of $73.3 million for fiscal year 2025, the district actually spent $75.5 million, Kessell said. That discretionary funding is a subset of the district’s total operating budget used for more flexible spending purposes.
And if the district had wanted to see the $7.9 million savings balance it originally projected, its discretionary budget should have been set closer to $70 million, he added.
Essentially, Kessell said, the district over-spent and over-budgeted.
Longfellow also noted there had been a “lack of proper planning for expenditures, clarity around the cost of programs, and transparency around how programs and staff are funded.”
Recent labor contracts, like those for paraeducators to serve as teachers or substitutes, were cited by Longfellow as costs that were “significantly” underestimated.
The presentation laid out multiple recommendations to better plan future budgets, including reinstating budget development meetings between fiscal staff principals and district office leaders.
“We can’t just say, ‘We’ll find the money,’” Longfellow said. “That’s not the answer.”
Longfellow suggested the district reinstate notekeeping or meeting minutes of its Financial Advisory Committee meetings, which are made up of private citizens with financial backgrounds.
Minutes for the FAC meetings are not currently available on the district’s website, and York reported that her office was not able to obtain any such documents in its review.
Although the district said it immediately took some actions to prevent the need for the Delaware Department of Education to appoint a financial recovery team for the district, Kessell and Longfellow presented 24 recommendations in total to the board.
Burrows said that during either the board’s financial workshop scheduled for Oct. 28, or its November meeting, district leaders will list out and explain how they are enacting each of the recommendations.
