skip to main content

Publications

SEE YOU IN COURT! - March 2016

CABE Journal

March 2016

Authors: Thomas B. Mooney

Now that the budget for next year was finally completed and submitted to the Town, the Nutmeg Board of Education turned its attention to the current year’s budget.  Board member Red Cent had been poring over the monthly financial reports, and she raised a number of questions at the Board meeting last month.  She noted, for example, that the supplies account at Acorn Elementary School was in the red, as was the substitute account at Nutmeg Memorial High School, where absenteeism was endemic.  “Who’s in charge here?” she demanded stridently.  “If we overexpend our budget, the Board members will be personally liable.”

“Oh posh,” said veteran Board member Bob Bombast.  “If anyone is liable, it will be Mr. Superintendent for not keeping his eye on the budget.  We set the budget, and the Superintendent spends it.  It is not our problem.”

Mr. Superintendent bristled visibly at Bob Bombast’s comments.  “We are in this together.  We carefully monitor the budget, and we move things around as necessary to assure that we stay within the budget.”

After hearing Mr. Superintendent’s explanation Board member Mal Content weighed in with a question of his own.  “Aren’t we supposed to monitor line item transfers?  The Board can’t just leave things to the Superintendent and his staff.”

Mrs. Chairperson sought to regain control of the discussion by employing her favorite strategy – creating a committee.  “OK.  I have heard enough.  I think that we need to get a better handle on our finances.  I am creating a Budget Oversight Committee, and I appoint Bob Bombast, Mal Content to the committee along with Red Cent, who will serve as chairperson.”

Red Cent couldn’t wait to get to work.  She appeared unannounced at the Business Manager’s office bright and early the next morning.  She demanded to see his Excel spreadsheet setting forth the expenditures at that various schools.  Red confirmed that the substitute account at the high school and the supplies account at Acorn Elementary school were overexpended, as she had suspected, and she found several other accounts similarly overexpended, including the conference expense account and the Superintendent’s discretionary account.  She promptly shared her findings in an email to fellow Committee members Bob and Mal.  After some discussion, they agreed to express their concerns as a Committee at the next Board meeting.

When the Board next met, Red did just that.  She reported on her findings, and she excoriated Mr. Superintendent for his lack of oversight.  Mr. Superintendent did his best to remain calm, and he explained that some variation from the detailed budget estimates is to be expected.   But he did tell Red to back off with the criticism on matters she really didn’t understand.

Who is right here?

*        *        *

Red has raised a legitimate issue, and the Board should clarify with Mr. Superintendent its expectations concerning budget management and reporting.  However, these small variations from the adopted budget should not be a problem for the Board.

Conn. Gen. Stat. Section 10-222 provides that the “money appropriated by any municipality for the maintenance of public schools shall be expended by and in the discretion of the board of education,” and further that “[e]xcept as provided in this subsection, any such board may transfer any unexpended or uncontracted-for portion of any appropriation for school purposes to any other item of such itemized estimate.” 

When boards of education need to exercise their right to transfer funds from one item to another, they must remember that only the board of education may make item transfers unless it delegates that authority to the superintendent (or other employees).  Such delegation, however, is limited in two ways.  First, such transfers must be “limited,” which presumably means that the board must specify a maximum amount that the superintendent or other authorized person may transfer on his or her own.  Second, authorized persons may transfer from one item to another only “under emergency circumstances if the urgent need for the transfer prevents the board from meeting in a timely fashion to consider such transfer,” which is a tough standard to meet.

The statute also imposes special notification requirements on such transfers.  Since 1998, transfers made by authorized persons other than the board of education must “be announced at the next regularly scheduled meeting of the board,” and since 2013 the statute has also provided that “a written explanation of such transfer shall be provided to the legislative body of the municipality or, in a municipality where the legislative body is a town meeting, to the board of selectmen.”  Given these requirements, it is usually easier for boards simply to make transfers themselves.

The key in such matters is for boards of education to adopt a reasonable definition of what should be considered an “item” in the budget estimate submitted to the town and in the adopted budget.  Here, statute itself gives us some help, providing that “‘itemized estimate’ means an estimate in which broad budgetary categories including, but not limited to, salaries, fringe benefits, utilities, supplies and grounds maintenance are divided into one or more line items.”  To avoid triggering the special procedures described above with unnecessary frequency, boards of education are well-advised to define “item” broadly.  To be sure, the board and superintendent may subdivide budget item further in the interest of fiscal oversight, but when “item” is so defined, the obligations regarding budget transfers will only be triggered when funds are moved from one major budget category to another.  With such a definition, the need to make adjustments to address the shortfalls Red identified in Nutmeg would likely not be “transfers” under the law.

Finally, the concern of Red Cent over personal liability is admirable, but perhaps overstated.  Conn. Gen. Stat. § 7-349 does provides that a town official who authorizes expenditures in excess of funds appropriated “shall be liable in a civil action in the name of such town.”  However, Conn. Gen. Stat. § 10-235 provides that school board members (and employees and even volunteers under certain circumstances) are indemnified and held harmless against claims made against them for actions taken within the scope of their responsibilities unless those actions are “wanton, reckless or malicious.”  Therefore, it is reasonable to presume that a board of education member will not have any personal liability if he or she acts in good faith, even if it turns out later that the budget is overexpended.

Attorneys

Practice Areas

Industries & Featured Services

© Shipman & Goodwin LLP, 2017. All Rights Reserved.