Pattye Benson

Community Matters

It Happened Again — $2M Budget Deficit Magically Becomes $3.1M Surplus as TESD Taxpayers Endure 17 Yrs of Tax Increases! How is This Possible Year After Year?

At the time of the TESD budget passing in June the Business Manager claimed a projected $2M deficit for the year and … as a result, the taxpayers receive a tax increase. Fast forward and less than four months later and this same business manager tells the school board at the October Finance Committee meeting tonight (agenda attached) that not only did the District not have a deficit but instead magically had a surplus of $3.1M! Why Does This Keep Happening??

Folks, this happens yearly – the business manager presents fictitious deficit budget to the school board – the school board votes for a tax increase (17 straight years!) – and then millions are magically found in surplus. This is not a financial pandemic anomaly — just like the yearly tax increase, the surplus happens year after year. If you don’t believe me, go to the top left  on Community Matters homepage and enter “budget surplus” in the search bar – and you will see how this “new math” style of budgeting and increasing taxes has gone on for years with the Business Manager.

In advance of tonight’s Finance Meeting, I received the following email from Keith Knauss, former Unionville-Chadds Ford school board member. As noted by Keith, this is the third year in a row of a budgeting error — the budget surplus and resulting inaccurate taxing of residents did not happen as a result of the pandemic … it’s a yearly event!

After reading Keith’s analysis, I think you will agree that voters need to support school board directors with strong accounting backgrounds in the upcoming Nov. 2 election! (There are 4 seats available on the school board — please vote for candidates that understand finance and the budget process and that will hold the Business Manager accountable.)

Email from Keith Knauss, dated 10/10/21 (with his permission):

The agenda for the upcoming Finance Committee contained the following slide comparing the Original Budget for 2020-21 to the Projected Actual.  (we’ll get the audited numbers next month)

Mr. McDonnell misled the board in June 2020 when the Original Budget was passed with a 2.6% tax increase.  Mr. McDonnell told the board and public that even with a tax increase of 2.6% the district run a deficit of $2,223,426 (outlined in red) and the deficit would have to covered by withdrawing money from the Fund Balance.  Well, lo and behold, the district actually ended up with a $3,383,930 surplus instead of a $2,223,426 deficit! 

Why does this matter?  Shouldn’t everyone be happy that we have a surplus rather than a deficit?  There are two problems.

1. Had Mr. McDonnell estimated revenues and expenses correctly the board and public could have contemplated a lower tax increase, or no tax increase at all.  The 2.6% tax increase only brought in $3M.  Thus, the district could have had a balanced budget with no tax increase at all.  Instead, Mr. McDonnell presented the board and public with a fictitious deficit budget which induces the board to enact the maximum tax increase possible. 

While a one-year budgeting error would be excusable due to unforseeable circumstances, this the third year in a row where a deficit was predicted, but a significant surplus was realized ($4.5M and $6.0M) making the tax increases for the past three years questionable.

2.  Had Mr. McDonnell estimated revenues and expenses correctly the board and public could have dispensed with the ritual of Budget Impact Strategies that unnecessarily decrease the educational experience of the students.  Why cut student services if a cut is not needed?  A representative slide is included below.

The bottom line:

The administration provides the board and public with estimates of revenues and expenditures during the budget process.  The job of the board with input from the public is to balance the budget by either increasing revenue through taxation and/or decreasing expenses by cutting programs. 

If the revenue and expenditure numbers provided by the administration are false and unreliable either because of ignorance, or worse, by design then informed decisions on taxation and programs are impossible.   The administration has for the past 3 years skewed budget estimates in a direction (underestimated revenues; overestimated expenses) designed to present a false picture of financial distress leading to over taxation.
I’ll also note that the board is contemplating a $3M transfer from the General Fund to the Capital Fund to be back-dated into the fiscal year that ended last June 30th.  This is illegal as per School Code:

Section 687. Annual Budget; Additional or Increased Appropriations; Transfer of Funds.

(d) The board of school directors shall have power to authorize the transfer of any unencumbered balance, or any portion thereof, from one class of expenditure or item, to another, but such action shall be taken only during the last nine (9) months of the fiscal year.

If the board wanted to transfer funds to be recognized in the 2020-21 fiscal year, they should have made the motion before June 30th.  The board can transfer the $3M from the General Fund to the Capital Fund now, but the transfer must be recognized in the current fiscal year not in the fiscal year that has already ended.

Keith Knauss

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  1. The evidence is in. We need to elect a school board who is committed to firing the current business manager. We don’t need another rubber stamp school board!

  2. Exactly. As Pattye suggests, we need school board members who understand accounting principles. Keith, Ray Clarke, Neal Colligan, etc. have been saying it for years. Voters PLEASE look at the background of the candidates — they NEED financial/accounting background. Otherwise, they will defer to the business manager as the current school board does.

    No Deficit and $3+ million surplus! I’m supportive of the school district and paying taxes when needed but come on people, this is ridiculous.

      1. Art McDonnell’s contract simply rolls over each go around — his reward for the “accounting error” was a 5-year contract, which was longer than previous ones.

  3. Here we go again. I really do not have time to continually follow this ineptitude. I put my time in thirty years ago as a Civic Association representative for many years. Maybe someone could focus on actual monies needed in a five year plan to get better perspective of the function of the present surpluses and the true necessity.

  4. I pointed out two years ago to the school board that these post fiscal year transfers where not legal.

    Art McDonnell stated that they could because of the 13th month accounting rule that is done for items encumbered for a fiscal year but not paid for until the following fiscal year. Those items need to be accounted for in the encumbered fiscal year.

    This ridiculous rationale completely fails when you read the actual language of Section 687.

    I really wish the school board would stop breaking the law. Perhaps it is time to notify the state attorney general as it is obvious that they refuse to listen to the public on this.

    I would like to point out that not only does the 13th month not allow for this illegal action they are about to take, but it is the law that the school district must follow in regards to encumbrance rules and the law that Art McDonnell chose to ignore when he did not apply the $1.2 million Special Ed expenditures to the correct year instead of fixing it before the audit completed and notifying the board. Instead he choose to not tell the school board, lie about it for two years as people asked about the numbers, and then lied about the fact that you could fix the numbers.

    Does the school board really not care about following the law? Actually, the answer is quite obvious that they don’t as they keep Art McDonnell as their Business Manager. He had to wear an ankle bracket for many school board meetings when he started working for the school district due to breaking the law. Just a little over a year ago, a search warrant was executed against him to search his car while it was on school district property. The worst part is the the administration didn’t even bother to tell the whole school board about the incident. If I was on the school board, I would have been furious about not being told about the incident and it being kept from me. Isn’t the fact that an administrator’s car was searched by the police in the middle of the school day pertinent information that the school board should know about?

    1. I also heard when he had the ankle bracelet that he had to report on the weekends as it was due to a drinking and driving incident. If any of our teachers had to go to jail for the weekend or wear an ankle bracelet they’d be gone so fast- why don’t the same rules apply to administrators? Does he have dirt on someone to avoid the consequences of his continual mistakes?

      1. In December 2014, McDonnell pled guilty to DUI —
        The business manager lost his license for a year (had to be driven to work, meetings, etc) and was required to wear an ankle bracelet for the year. This was not his first DUI. The school board gave him a raise and a new contract.

        Simply put I didn’t understand the actions of the school board as it related to the business manager in 2014 anymore than I understand it now. In private industry, any of these infractions would have put the employee “on notice” at the very least. Yet, somehow Art McDonnell appears to be the tenured employee of TESD. I have given up trying to understand — except to say that NO ONE on the school board appears to have the necessary background to challenge him. Sad …

    2. Doug,

      You say,

      “ Just a little over a year ago, a search warrant was executed against him to search his car while it was on school district property. The worst part is the the administration didn’t even bother to tell the whole school board about the incident. ”

      Why was a search warrant executed against Business Manager TESD, Art McDonnell to search his car while it was parked on school property? What were the authorities looking for? Am I correct that the Administration notified some School Board members, but not all of them? Which school board members were notified? Thank-you.

  5. Found this site when forwarded a FB post. Totally new to the world of local politics, so please excuse the ignorance. Just wondering if there are any other options besides voting in the 4 new board members that “may” replace the finance member in question? Vote of no confidence or other means? If the actions taken are illegal then it should be reported to the state AG and handled immediately instead of waiting for election day.

    1. Welcome to the world of local politics! If there are not school board directors with financial/accounting background (which is what we currently have on the school board), it makes it difficult for them to question the business manager. At school board meetings, if a resident (with financial background) makes a comment or asks a question of the school board, most often the question is simply deferred to Art McDonnell, the business manager, for response. You have to have a certain level of understanding of budget process to even know to question. Sadly, the school board has displayed a “stand by my man” attitude — and I should say this has gone on for years, well before any of the current school board tenures.

  6. What is even worse than the budget being off $5.5M, is the fact that Art McDonnell’s end of year projection last June with two weeks left in the fiscal year was off by $3.8M.

    How can you be off $3.8M in your year end estimates with two weeks left in the school year?

    Either Art McDonnell is completely incompetent in his job or he is just making up numbers to present to the school board to scare them as they debate the budget. If it was total incompetency, then the numbers would be high one year and low another year randomly. Instead what we see is year after year underestimating revenue and overestimating expenses with two weeks left.

    This is complete fraud. Why doesn’t the school board care that Art McDonnell lies about the numbers from his department that they use in their budget decision making process?

    1. I think it’s possible that Federal Pandemic Relief Funds came through after the vote to raise our taxes. I think Dr. Hotinski said in the June School Board Meeting that there might be funds, but they didn’t know what they might be getting – if anything. I am no fan of Art McDonnell, but I think this is possible. The line item Federal Sources for revenue is $2.7M greater than projected. That doesn’t explain why the Support Services number is off by $2.6M which is suspiciously close to the original deficit number of $2.2M. I hope you are at the meeting tonight.

      1. MTMR, I was at the meeting last night. I hope that people understand that the issue with the fiscal numbers from the administration is not about a one time event. Any one time event can be explained away. This is year after year after year of the numbers being way off in the exact same manner with two weeks left in the fiscal year.

        As I stated above, this is not a coincidence, this is fraud. Fraud is defined as “wrongful or criminal deception intended to result in financial or personal gain”. The administration is using fake numbers to scare the board into raising taxes more than necessary to meet their stated objectives.

        1. Possible stupid question ahead, but here it goes – What happens to the surplus funds year after year? Shouldn’t there be an excess of $3M+ next year? And from the year before? And if not what the heck happened? I know you’ve held their feet to the fire many times, but who is auditing the books?

      2. Pandemic funds go to the additional COVID testing on site, supplies, nurses, training, recording of the findings, and additional safety windows.

  7. This is exactly why Rachel Kill should be elected school to Tredyffrin school board- she has outstanding financial background.

  8. Pattye, I can’t thank you enough for your tireless dedication to improving our community by being a watchdog on ALL matters, especially financial ones. I attended the last school board meeting in September where the new money bond issuance was approved and I was severely disappointed in the lack of answers and combative responses I received to my basic financial questions. Not only do the current board members not have adequate financial backgrounds to be in charge of such a LARGE balance sheet, they continue to not hold administration accountable for these severe, avoidable mistakes that cost us taxpayers millions EVERY year.

    We need school board members with financial and accounting backgrounds! Thank you for pointing this out.

    1. I work in the investment industry where it is standard practice for independent boards of trustees for funds to have their own retained attorney. This attorney attends all board meetings and helps them understand their governance responsibilities under the law and execute this oversight effectively when engaging with the “adminstration” (a multi-billion dollar fund sponsor). Whilst my general view is that attorneys are responsible for more of life’s problems than they solve (excepting I’m sure any attorneys reading this), and I’m certainly never one to advocate wanton expense, however our school district’s issues do seem fundamentally a balance of power/information problem. Perhaps a thought for your platform and for carrying forward?

      1. TE’s attorney Mr. Roos who sits at every board meeting is an integral part of the problem. School directors are naive. They come and go; the administrators are forever. The result is that the the attorney is recommended by the administration and is 100% certain to be hired. The attorney is beholden to the superintendent and facilitates whatever the administration wants. And what the administration wants is more money. It’s so so much easier to run a district where there is lots of money for employee raises (for the administrators and the powerful teachers union) and pet programs for parents (smaller class size, Pre-K, full day K, sports facilities, new schools, etc.).

        1. Just to be clear, in the governance of investment funds, the board of trustees has its very own attorney, paid for by the “administration” for sure, but with a fiduciary duty to them alone ensuring that they are able to properly understand and exercise their oversight responsibilities. The administration has its own counsel. This is the system I was postulating: two attorneys in the same room creating a governance tension and leveling the playing field.

          1. Thank you Mr. Storer for the clarification. Two attorneys in the room One representing the board; one representing the administration.

            This two-lawyer situation would encourage the exploration of both sides of every issues rather than just the [possibly] slanted administrative side. Rather than a lawyer for the board, though, I might substitute a financial advisor with experience in K-12 finances. Financial knowledge is where I see the deficit for most boards.

          2. I was on the SB 2011-15.
            Which attorney represents the school board?
            There may be Director’s insurance.
            Mr. Roos represents the district.

    2. You defended the behavior of the man who screamed at the school board last month on Facebook. (Quote: “The passion on both sides I saw as a positive thing.”) In addition, you implied that the board president was lecturing and threatening audience members who had let their masks slip below their noses, which is inaccurate. She calmly requested that audience members who were intentionally taking their masks off to thumb their noses at rules legally put in place by our democratically elected officials go outside if they needed to do so.

      I fail to see how the behavior at that meeting was remotely acceptable–it was contemptuous, divisive, mean-spirited, and cruel. You write in Facebook that the school board should have listened to the other side. They did listen. You don’t like the fact they didn’t agree, because you think their votes should have reflected the viewpoints of those who spoke in the meeting. But their votes should reflect their constituency, not those who spoke at a particular meeting. In addition, you have no intention of listening to those who speak at school board meetings before deciding how you will vote on this issue–because you have already made a commitment to vote against mask mandates! It wouldn’t matter to you one whit that a good number of people at a meeting didn’t agree with you, or that a majority of people in T/E don’t agree with you, on this issue. Talk about hypocrisy.

      I would love to have the opportunity to go into the voting booth and vote for someone who will give us better budget oversight, but not at the price of enabling this sort of behavior. There are definitely some excesses on the other side of the aisle that bother me–in the U.S.–but fortunately those excesses have not been a particular problem in T/E. For the Republicans reading the comments, please pick better candidates next time if you care about the budget. I and many others in T/E will not vote for candidates who condone abusive political behavior.

      1. To Parent of 2020 grads

        Since You Mentioned it…

        First, just to understand—ONE issue does not make a campaign. I understand you being upset about some parent’s behavior, but that was ONE issue. You are stuck on one issue.

        What about ALL the issues that have been posted on this Community Blog for the past 4-8 years concerning this TESB & Admin?

        You honestly think the current TESB has done a good job managing funds, being inclusive to ALL parents and not forcing a liberal agenda on our students? You’re OK with the “Privilege Survey” your Stoga kids had to fill out?

        Since you mentioned it, “Republicans need to get better candidates”….Let’s take a closer look:

        Deana Wang, Rachel Kill put their names, reputations on the line in this cancel culture to speak up & represent parents, students & taxpayers because our current TESB would not. Here are some specific examples—-
        COVID-19–students were not responding very well to virtual learning. ONLY after 800 Parents Petitioned for IN CLASS Learning did the Administration start to put in place a plan to get students back, in class, full time.

        CRT-“Equity Initiative”–A very liberal, one sided, change to TE’s proven curriculum. Teaching kids they are victims, produces more victims.

        17 consecutive years of tax increases–No accountability for awarding contracts, $1.2M mistakes etc.

        Rachel Kill & Deana Wang are two working mom’s who have spoken up regarding these important issues. AND, they regularly attend TESB meetings, speaking up for parent’s, student’s & tax payer concerns.

        Since you mentioned it, which Democratic candidates that you support have done anything like that?

        1. Rachel Kill defended those who screamed at the meeting, and lost. Deana Wang took pictures with someone who attended the Jan. 6 riot at the Capitol, implying that the election was stolen and get Congress to overturn the 2020 election, and by so doing trying to prevent the votes of myself, my husband, my adult children, and my extended family from counting in that election. I have a right to have my vote count, the same as you.

          Please pick moderate candidates who represent the middle of our district, and not the radicalized right. That’s when you will start winning.

          1. Yes, we all deserve to have our legitimate vote count.

            Speaking of that, EVERY Republican was up in the count late Tuesday night. Mysteriously, we wake up Wednesday morning and ALL the Dems won. Mmm.

            All I know is the Dems in the area have a “checkered” history –just Google “Philadelphia Politicians Indicted”
            39 and counting in the past 15 years.

            Why did the DEMS push the Mail in Voting when COVID-19 is at an all time low? They tell everyone wear a mask, yet they can’t wear a mask to vote?

            Anyone who can think critically, knows something is not right.

  9. Disgrace during a pandemic year we are gouged again. That budget started at a 6% increase. Again all those budget charts are totally useless every year.. COLA for seniors was 1.3% this year. We have to live on a balanced budget why can’t the school district? Why have taxpayers tolerated this for 17 years? SEVEN board members voted for this budget TWO did not.
    Thank you Scott Dorsey and Kyle Boyer for your NO votes. This election PLEASE vote for someone with financial expertise this district needs it.

  10. If there are officials elected in who challenge him (can’t vote for Rachel Kill where I live, but I wish I could!), can the district even break Art’s contract without a ton of legal wrangling/proof of fraud?

  11. Several school board members who were questioning the budget were not reelected two years ago, altho they were running for reelection. Instead, voters replaced them with past administration personnel who have no opposition to the Administration. And this is the result. The nominees for the school board are selected by the two political parties, so unless they present capable nominees the voters have little chance to change. I’ve been following this for 30 years, and they only allow one or two fiscally responsible board members to sit on the board, who can be outvoted. Voters have no chance to change this without a good deal of public information and demand. That happened six years ago, but it takes a while for new board members to learn the ropes, and then they weren’t reelected. If you want change, there has to be more continuity. Demanding that nominees all have fiscal experience is one way to make a change, but also that they are impartial.

  12. When the community wakes up and starts to realize the politics behind the budget, then and only then, it will be fixed.

    Think—-Why, Why do you think the school board never addressed these ongoing budget issues?

    Who funds the school board’s agenda?
    The Business Director.

    So, when all the school board members who have their special agendas and want to fund and continue to fund questionable, expensive, special projects such as PEG-Pacific Educational Group—-Who is the person with the purse strings to fund their special projects? The Budget Director.

    Who is responsible for handing out TESD contracts?
    Who is responsible for Sole Source Procurements?
    Just look at the budget and the numerous consultants getting contracts.
    Who recommends these consultants????
    Who pays for these consultants? The Business Director

    As long as our kids perform well, they can all hide behind our kid’s grades and highly ranked schools.

    The gullible public continue to think, the school board must be doing a great job, without scratching the surface. And so they vote along party lines—voting on national issues, thru our local officials—creating the current issue.

    Only when we, as a community of concerned, involved parents, tax payers start to vote for people who have the ability to stand truth to power. That includes, question what is included in the budget and not continue to rubber stamp the budgets—until then, sadly, this will continue.

    We, our kids, deserve better.

  13. Saw this in the TE Patch today:

    Sad to see our district’s schools are trailing behind some of our neighbors. Nice to at least have the 2 middle schools and 1 elementary school in the top 50.

    I have been watching this district decline since my kids graduated several years ago. It’s not the same area my husband and I moved to almost 30 years ago to start our family, specifically choosing this school district to put our eventual 3 kids through. Sad. I don’t know what else to do.

  14. I understand as well as most the frustrations of trying to contribute to School Board decision-making, and that led me to spend more time with the Township on stormwater issues.

    One completely egregious practice has been astonishingly persistent, as pointed out by Doug, above: the use of year-end projections that must be known to be incorrect just two weeks from the end of the year, in order to scare the Board into appproving inflated budgets. The whole budget process is designed on that principle, right from the routine 7 figure “gap” that shows up every December.

    However, a bright spot: at least the Board has given up trying to balance the budget, now armed with the knowledge that a $2 million deficit will miraculously turn into a surplus twelve months hence.

    Thanks, in good measure, I think, to the efforts of Pattye and CM contributors who have shone a light into the murk. Hopefully many more will have the patience to continue and maybe we’ll come up with a better way to run the railroad.

  15. Below, please find an example of when you have elected officials taking their responsibilities seriously and DEMANDING answers.

    Since it’s too late for the current TESB to do so–
    -Demand answers for the $1.2M mistake
    -Provide details from the PEG-Pacific Education Group for materials
    -Provide details into numerous contracts including the TESD selection of auditors
    -Push back on consecutive tax increases, etc. etc. etc.

    You may want to take a closer look at current concerned mom’s who are running for TESB–and not just believe their crafted campaign slogans.

    Please Educate yourself–see which candidates who’ve been attending TESB meetings–for the past year, ASKING the hard questions-NOW. For those candidates are the ones who will represent you and your kids and not just rubber stamp issues because their political party tells them to do so or go along with the current board members just to get along.

    The article is an example of officials TE needs now—this includes TE’s Supervisors. Look into TE’s 2021-2022 Fund/Budget Proposal. Storm water is one issue, but who benefits from Multi-resident units being built in TE?…Not you, not your kids —but maybe a Real Estate Developer & Banker?

    Look closer, go on, look at the candidate’s backgrounds, not just their campaign mailers, ask the hard questions–TE’s future depends on it.

  16. It is unbelievable to see so many knowledgeable residents who have been engaged with our school governance for so many years, providing valuable information and assistance to our school board, but yet always got ignored. Who does our board represent indeed? During Monday’s Finance Committee meeting, when I and other parents, Doug and Rachel, raised our questions for this repeated budgeting fiasco, again, we only received the defensive pushback from our “representatives” who never take any responsibility for this obvious failure. In my opinion, this is such an embarrassment to themselves. Our school board definitely need someone who can understand the numbers better, who can voice on behalf of the taypayers and exercise the oversight power on administration to do their job right. Thanks to Pattye for providing this great platform for residents to exchange information here and to keep all of us informed with the facts. Change is definitely needed in TE.

  17. Looking at the first slide, it seems like a significant part of the “magic” change from a projected deficit of $2.2 million to a surplus of $3.4 million was additional revenue from the federal and state governments of $3.35 million. Without that added revenue, the budget would have had about a $400,000 surplus.

    Most probably that was a combination of federal and state stimulus funds that will be non-recurring. The estimate of local tax revenues was actually underestimated.

    Although we still need to find out why expenditures were overestimated, the budgeting error was 1.8% of projected expenses. How many businesses with $150 million come within 1.8% of their annual expense budget?

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