'Salaries exceeded appropriations': TN audit finds budget deficiencies for county schools

The recent state audit for Rutherford County found two budgeting deficiencies for schools and a deadline violation for the government.

The Tennessee Comptroller of the Treasury recently released online the Annual Comprehensive Financial Report for Rutherford's previous budgets for the fiscal year that ended June 30.

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Two of the audit findings involved school spending for pay and capital projects for campus maintenance being more than approved appropriations by the Rutherford County Commission. School district officials were dealing with the past year's expenditures while also touting a proposed balanced budget for the current 2023-24 fiscal year.

"Salaries exceeded appropriations in 18 of 96 salary line-items of the General Purpose School Fund by amounts ranging from $84 to $1,660,691," the audit report said.

"The budget and subsequent amendments approved by the County Commission for the Education Capital Projects Fund resulted in appropriations exceeding estimated available funding by $227,277," the state audit added. "Sound budgetary principles dictate that appropriations be held within estimated available funding."

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Schools finance director: 'This will not happen again'

The audit recommended that all school appropriations that exceed estimated available funding should not be submitted to the County Commission.

"The County Commission should not approve such appropriations," the audit finding said. "Expenditures should be held within appropriations approved by the County Commission."

Rutherford County Schools responded with a statement included in the audit report from Brian Runion, the chief finance officer for the district.

"I do concur with this finding. Due to paying multiple payroll accruals and a staff bonus at the end of the year, we were unable to get budget amendments passed through required school board and local government commissions in required time before the fiscal year completed."

Runion also followed up with the audit finding with a Jan. 8 letter to Jeff Bailey, the legislative audit manager.

"We currently review all actual vs. budgeted expenditures on a monthly basis for exceeded appropriations and will pay any additional stipends or bonuses at earlier dates," Runion's letter said. "This will allow ample time to amend budget at year end if need be and ensure this will not happen again."

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Schools director discusses audit with his board

The bonuses mentioned in the state audit report were for hard-to-fill positions. Although the bonuses had budget approval from both the Rutherford County Board of Education and County Commission, an amendment was needed for the specific line items, schools spokesman James Evans said.

Rutherford County Schools Director James "Jimmy" Sullivan spoke to his elected board about the audit findings during a Monday night work session and had plans to provide the same report to the commission's Health and Education Comittee, Evans said.

"The issues raised have already been corrected," said Evans, who noted that the 2022-23 budget was crafted prior to Sullivan replacing former Schools Director Bill Spurlock. "Dr. Sullivan believes in total transparency and has taken responsibility."

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Evans also provided The Daily News Journal with the following statement from Sullivan:

"While I am disappointed to have any audit finding, I am proud of the work of our team in navigating an inherited budget with an overall $28 million deficit and working through the school year to realize a $10 million plus surplus," Sullivan said.

Spurlock said he's concerned about the appearance that he had something to do with a mess being left behind before agreeing with the school board by late March 2022 to vacate the director job by June 30, 2022, rather than serve until his contract ended June 30, 2023. The board decided by late May to promote Sullivan, who served as Spurlock's appointed assistant superintendent for curriculum and instruction, to be director by late May 2022.

"When I left the position as director of schools, the budget was approved by both the school board, Dr. Sullivan, and the County Commission," Spurlock said. "The issue with the salary finding has more to with Dr. Sullivan and his financial staff failing to reconcile the expenditures within the salary line item. He also provided bonuses that were not accounted for. I do believe the culpability lies within several areas."

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County government breaks deadline law

The other finding by the state audit pertained to Rutherford failing to provide budget information to the Comptroller by the Aug. 31 deadline required by state law.

The deadline issue ties to a previous budget that provided raises up to 20% to remain competitive in pay in response to inflation. The 2022-23 budget also included a $64 million deficit to fund services for fast-growing Rutherford, so the County Commission responded with a nearly 16.2% property tax hike to fund this year's budget.

Rutherford County Finance Director Michael Smith responded with a statement in the audit report:

"I do concur with this finding. Due to staff turnover in our risk management office and new staff at the third-party actuary company completing our Other Post Employment Benefits Study (OPEB), getting the OPEB study took longer than anticipated. Additionally, the data took longer to compile since the Rutherford County School System is partially no longer a part of the county’s medical insurance plan."

Smith also responded to the audit finding with a Jan. 8 letter to Bailey, the legislative audit manager.

"We have trained additional personnel and worked with our third part actuary to ensure this will not happen again," Smith's letter said.

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State recommends centralized purchasing system

In addition to the three findings, the audit recommended the county adopt a centralized purchasing system for all departments to improve internal controls over the process.

"The absence of a central system of purchasing has been a management decision by the County Commission resulting in decentralization and some duplication of effort," the audit said. "The Division of Local Government Audit strongly believes that the adoption of a central system of purchasing is a best practice that would significantly improve accountability and the quality of services provided to the citizens of Rutherford County."

Rutherford County Commissioner Robert Peay Jr. said he could support a centralized purchasing board being established as long as the County Commission and the commission's Budget, Finance and Investment Committee retains oversight of the county finance director.

"I’d rather the commission retain control over the finances of the budget since we have to answer the public and set the tax rate," said Peay, who serves as chairman of the budget committee.

Peay also said he'd want input from county officials, including from the school district, Highway Department and mayor in pursuing any centralized purchasing system that's been recommended by the Tennessee Comptroller's Division of Local Government Audit for about a decade.

Reach reporter Scott Broden with news tips or questions by emailing him at sbroden@dnj.com. To support his work with The Daily News Journal, sign up for a digital for all dnj.com stories.

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Reach reporter Scott Broden with news tips or questions by emailing him at sbroden@dnj.com. To support his work with The Daily News Journal, sign up for a digital subscription.

School board budget numbers

• Main budget for operations at start of current year July 1: $518.4 million

• Deficit: zero

• Estimated money in reserves for emergencies: $51.5 million

• Budget for cafeteria operations: $34.2 million

• Deficit for cafeteria operations: $4.5 million

• Note: Cafeteria reserves will cover deficit

Source: Rutherford County Board of Education staff

This article originally appeared on Murfreesboro Daily News Journal: TN audit finds 2 budget deficiencies for Rutherford County Schools