Audit shows city schools' deficit has hit $58 million

System so short on cash it needs future revenue to cover current costs

January 07, 2004|By Liz Bowie | Liz Bowie,SUN STAFF

The Baltimore school system's financial woes are even worse than previously announced, officials acknowledged yesterday as they released an audit that showed the accumulated deficit had grown by $6 million to $58 million.

The system is now so strapped for cash that it is receiving its bimonthly revenue payments from the city ahead of schedule so that schools can cover operating costs. The city paid the school system this month the money that was due through next month, according to the district's chief financial officer, Rose Piedmont.

But even those measures will not be enough to keep the system solvent in the coming months, Piedmont said.

"We will be discussing the cash situation with the [school] board on Tuesday ... what actions we are taking with the city and the state to make sure that we are able to meet our obligations," Piedmont said.

She declined to discuss details of the system's plan before next week's school board meeting, but school officials have been trimming costs to keep spending within the budget and reduce the deficit.

The school system laid off 709 employees in the past month and is expected to announce further reductions in staff as early as next week. Chief Executive Officer Bonnie S. Copeland also is considering furloughing staff for as many as 10 days this year.

The deficit increased, Piedmont said, when the outside auditing firm of Thompson, Cobb, Bazilio & Associates decided that $6 million in revenues would never be collected.

For two or three years, she said, the system has accounted for as revenue on its books money from Medicare that it has never been able to collect. Piedmont, who began her job as the audit was being completed, said she did not attempt to argue with the auditors over the issue.

"Our goal was to do the right thing," she said.

The financial problems of the system began several years ago when it began to accumulate a deficit, and they came to a head this past fall after Copeland became the new CEO and began scrutinizing the system's finances.

Piedmont said adjustments to spending may have to be made because of the most recent increase in the deficit. "As we discover things, we are going to have to make adjustments to the cost containment plan," she said.

The school system also discovered recently that it did not budget to pay substitute teachers this year. In addition, millions are owed in unpaid bills. "It is not our intention to default on anything," Piedmont said.

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