Budget error means San Ysidro School District owes state $5.1 million

The San Ysidro School District for two years overstated student enrollment and now owes the state an estimated $5.1 million.

But inewsource has learned the district’s budget problems don’t end there.

New administrators hired last month following the resignations of the superintendent and his deputy have also uncovered an estimated $2.1 million in expenses that were never funded in the current budget.

Those errors occurred because district officials failed to budget $1 million to pay for 12 new teachers, $600,000 in salaries for non-teaching staff and $500,000 for a 2 percent teacher bonus.

Peter Wong, the district’s new interim chief business officer, said he has worked in three previous school districts and never has seen these kinds of errors.

“This kind of mistake was not one I was accustomed to,” Wong said.

Wong and interim Superintendent Mary Willis said that by using a variety of revenue sources, including reserve funds and unspent money in the current budget, the district will be able to repay the state and cover the budget errors.

But going forward, Wong projects the district will have a $2 million deficit in each of the next two fiscal years.

“It would not be wise to just sit back and wait till … we cannot maintain our solvency,” he said. “We should take a more proactive approach to try to rectify this situation.”

Explaining the attendance error

In 2013, the San Ysidro School District was facing bankruptcy and a takeover by the state. It took about two years for the middle and elementary school district to begin to recover financially and avoid bankruptcy.

The district’s current financial woes aren’t that severe, but they are serious, district officials said.

The latest money troubles started when the district miscalculated its attendance for fiscal 2016. An audit that year uncovered the district had overestimated attendance by 262 students — a significant error because school districts get funding from the state based on attendance. The audit also found that district officials did not seem to understand how to calculate a key aspect of average daily attendance.

That meant San Ysidro was overpaid $2.6 million because of the error, the audit said. But instead of paying back the state, district officials set aside the money and disputed the claim.

Then, Wong said, the district used the same incorrect student numbers for fiscal 2017 and was overpaid an estimated $2.5 million.

Wong said when districts build their budgets they’re allowed to use the enrollment numbers from the previous year — but not if they are wrong.

Now, the district is dropping its attendance dispute with the state, Willis and Wong said.

To repay the state, the district will use the $2.6 million it set aside during the dispute as well as $2.5 million it had in reserve for unspecified liabilities such as lawsuits or other claims, Wong said.

“It’s really obvious,” Willis said. “If the money came from the state and you didn’t have the students or the base to get it, then you give it back. There’s no complication. … You just pay it back.”

Wong said he doesn’t believe the error was intentional. Still, he said, it’s not an ideal financial situation to be in.

“This is not a very good accounting practice,” Wong said. “I mean, we all make mistakes but usually you don’t make the same mistake twice.”

Julio Fonseca was the superintendent when the district first provided the state with the inflated student enrollment numbers, as was his top finance officer, Jose Arturo Sanchez-Macias. They also were both there when the audit uncovered the error.

The two also prepared the fiscal 2017 budget that again included the incorrect student enrollment figures.

Fonseca resigned in September amid allegations of financial misdeeds. Sanchez-Macias briefly served as interim superintendent before resigning in November.

Other budget errors

Wong doesn’t know specifically how the other $2.1 million in budget errors occurred, but he and Willis are working to find a way to pay for them.

The biggest chunk they plan to use will come from $700,000 of uncommitted funds in the budget for services and operating expenses.

They also intend to use $500,000 in uncommitted funds for books and supplies. As much as $400,000 also will likely come in energy savings from an ongoing solar panel project.

That means district officials need another $500,000 to wipe out the $2.1 million budget errors.

The district also needs another $1.5 million to cover unfunded expenses, bringing the total to $2 million, Wong said. He expects the district’s $10.8 million reserve fund to be used to cover the deficit.

Willis said San Ysidro’s financial issues are serious and will require the five-member school board to “tighten the belt” going forward so that the district’s future financial obligations can be met.

“They really do need to look at how are we spending our money,” she said.

CORRECTION: The original version of this story incorrectly said the first budget that overstated the student enrollment was prepared by then-Chief Business Officer Dena Whittington. The story has been updated to reflect that occurred when Julio Fonseca was the superintendent and Jose Arturo Sanchez-Macias was the top financial officer.