LOWELL — A month after the City Council passed the $521,690,534 appropriation budget for fiscal 2025, that included several rate hikes on residents for property taxes and water, sewer and parking services, two separate audits revealed serious ongoing accounting problems including $12 million in checks written to the city from the city.
The 11 councilors received information reports from City Manager Tom Golden detailing significant deficiencies in the city’s fiscal operations during their June 25 meeting.
Each year, Lowell — through the City Auditor’s Office — engages an outside audit firm to conduct testing of the city’s financial activity, prepare the city’s basic financial statements and provide commentary on the strength of the city’s internal controls over fiscal activities.
The management letter to Golden from the certified public accounting firm of Powers & Sullivan LLC said that many of the accounting issues have been raised with the city administration since 2020, and “have not been fully addressed.”
“We continue to recommend that the City review its practice of issuing checks to itself and implement new policies and procedures to stop utilization of these checks and alleviate the timing and reconciliation issues caused as a result,” the report said.
The report, which covered fiscal 2023, noted that checks were written for parking, the water utility, police details and the Lowell Public Schools.
“Eliminating the process of writing checks to ourselves will reduce risks associated with the warrant process,” the Powers & Sullivan report said.
The Lowell School Department was specifically targeted by the firm for significant deficiencies in accounting practices, which was overseen by former LPS Chief Financial Officer Billie Jo Turner.
Superintendent of Schools Liam Skinner ordered an internal audit of the district’s financial systems, and its findings were presented to the School Committee during its April 17 meeting.
“Significant concerns” were raised by the Abrahams Group, including a $270,000 budget “variance” that the district is investigating.
In April, the same month as the release of the Abrahams Group findings, the district released a statement that Turner would resign on June 30, at the conclusion of this fiscal year. Her 2022 contract showed an annual compensation of just over $176,000, and was to have run through June 30, 2025.
The audit revealed that budget reports submitted by her office were filed late, and caused the Department of Elementary and Secondary Education to withhold the Chapter 70 state aid payment for the beginning of fiscal 2024.
Millions of dollars in grant funding were not expensed and were returned to the federal and state awarding agencies in fiscal 2023.
“We receive the funding from the state and federal,” Councilor Paul Ratha Yem said. “And due to the mismanagement … the funding was returned. This is not a good sign.”
He said he understands the school superintendent is hiring a new CFO, and he hopes school and city officials will work together to “rectify and correct this situation.”
The audit found several examples where the number of staff on the roster did not mirror the number of positions in the budget. In other words, terminated employees were still being paid.
“One overpayment of approximately $43,000 was settled, in a legal agreement, for $18,000,” the Abrahams Group report said.
The audit also found the district was purchasing untraceable Market Basket gift cards, which the Powers & Sullivan report said “pose an extremely high risk for misuse and fraud.”
The loss or misuse of School Department money comes at a time when the district is facing a fiscal cliff. The School Committee approved a budget that cut staff, programs and services in in the fiscal 2025 budget, due to the end of the federal Elementary and Secondary School Emergency Relief program.
ESSER provided three years of post-COVID relief and accounted for $28 million of the district’s fiscal 2024 budget.
“Though healthy, our fiscal 2025 budget cannot sustain all of the projects, staffing and programs our ESSER-supplemented fiscal 2024 budget afforded us,” Skinner said during a May 4 school budget hearing. “We do need to make some cutbacks. That is unfortunate and that is painful.”
Across the chamber last Tuesday, councilors were alarmed by the scale and scope of irregularities on the school side of financial operations and ongoing accounting deficiencies on the city side.
City Chief Financial Officer Conor Baldwin recommended that the informational reports on the various city and school audits be referred to a joint meeting of the City Council and School Committee’s Finance Subcommittees, which was unanimously approved by the council.