The report consisted of several audits and found issues related to policy compliance, lack of management review and some tax expenses not being appropriately spent.
The Appoquinimink Board of Education voted to implement a 10 percent tax rate increase allowed following a property reassessment in July after uncovering a massive deficit due to accounting errors. The inquiry reported a shortfall of $4.9 million.
Delaware State Auditor Lydia York said district staff had accurate data, they might have made different decisions.
"You can't make good decisions with bad data… So it's not that they were running this deficit knowingly," York said. "They were running this deficit literally unknowingly, and that [...] is going to give you a sort of an upside down approach to dealing with things.”
Appoquinimink superintendent Matt Burrows said in a written response the inquiry echoed what district officials already knew.
"Throughout this summer, we’ve been highly focused on our path forward to ensure this does not happen again," Burrows wrote. "The work we’ve already undertaken aligns with the State Auditor’s recommendations."
New Castle County Council member Kevin Caneco was the first to call for an audit. Seven state lawmakers published a letter addressed to the State Auditor shortly after, also requesting the state look into the school district’s finances.
State Auditor York’s office agreed to conduct a special inquiry July 16.
York’s office released the report Sept. 3. It said the Apppoquinimink Board had tools in place to avoid budget shortfalls but did not use them.
“Tougher questioning of budget assumptions, proactive use of the [Financial Advisory Committee], and transparent communication with the public could have provided time to determine alternative solutions to avert their shortfall,” the report said.
The Board did not communicate these issues to the community even though there were warning signs months ago, according to the report.
“[They] not only blindsided families with a 10% increase of prior year current expense tax revenue but also damaged public trust,” the report said.
The Board works with the superintendent and CFO to maintain the district’s fiscal health. The report found the superintendent Matthew Burrows did not adequately perform his role and “allowed errors to accumulate unchecked.”
New Castle County Council member Caneco called for Burrows's resignation in a press release Wednesday afternoon.
"The report from Auditor York reveals a pattern of incompetence by Dr. Burrows. For years the Superintendent has failed to address the systematic financial issues the district had, and by doing so misled the public. He has lost the trust and confidence of the community. Dr. Burroughs should resign and allow someone else to lead and fix the systematic failure at Appo.”
The special inquiry also found issues with the CFO, who helps develop the district budget and makes sure the district is compliant with state and federal regulations.
“AOA found no segregation of duties associated with financial reporting,” the report said. “Instead, all reports were prepared and submitted by the CFO. The CFO provided summary reports to the FAC but did not include meaningful supporting documentation to demonstrate their appropriate beginning balance, or to compare the budget to actuals as recorded in FSF. The CFO failed to properly support the District’s fiscal operations as intended.”
The district’s superintendent and CFO did not adequately rely on and seek support from the Financial Advisory Committee, the auditor’s report stated. That committee exists to monitor and review fiscal documents and processes to ensure gaps in budgets are caught early.
"We understand that we must rebuild trust with our community, and we will work tirelessly to ensure that happens," Burrows said in a written statement.
The district has already hired a new financial director, added additional FAC members and created a space for FAC documents and meeting minutes.
Moving forward, York’s office recommended Appoquinimink School District establish better practices in the finance office, implement training for school secretaries, start a review process for budgets and monthly revenue reports and train Board members and other staff to have more in-depth financial knowledge.
It also said the district should format financial and budget reports in an easily understandable way and work with the Delaware Department of Education to improve practices.
The state of Delaware does not currently require school districts to follow standardized fiscal practices.
York said the mistakes made in Appoquinimink were not done maliciously and potentially point to a statewide issue.
"The reality is that when we go to look for something and we see something in one place, it's unusual if we don't see something very similar somewhere else…" York said. "I've been talking to Secretary of Education and I think we agree that there is room for improvement here.”
In an introduction at the beginning of the report, State Auditor York said this inquiry might suggest a need to examine Delaware's 19 school districts.
“There is a strong tradition of and need for local control in public education,” York said. “However, the lack of standardization across school district fiscal departments may contribute to situations like the one at Appoquinimink evading the view of regulators and auditors until they become crises.”
The Appoquinimink Board of Education's next meeting is Sept. 9 at 7 p.m.
