Letter to the Editor: Former Assistant Superintendent of Administrative Services Sets Facts Straight on BUSD Budget Fiasco

Honorable Members of the Board, Dr. Matt Hill, and Andrew Cantwell,

This letter is in response to the Board Report on tonight’s agenda, Disclosure of Accounting Error and Budget Update.

My name is Debbie Kukta, and I am BUSD’s previous Assistant Superintendent of Administrative Services.  By inference, this report impugns my integrity, my reputation, and my professional standing.  The finger pointing at someone who hasn’t been with the District since September 2022, and is receiving blame for things I would have had no control over, is typical of the culture and District leadership which has caused so many principals, administrators, and other staff to leave.  Last week, I heard rumors that I had hidden money that the superintendent didn’t know about, but that Mr. Cantwell had “found.”  What Mr. Cantwell actually “found” was his own error of not backing out of 2022-23 the $6.9 million retro payment that was accrued/expensed in 2021-22 but paid in 2022-23.  I’ve been in this community for a very long time, and anyone who knows me, knows there is absolutely no way I would have hidden money.

I brought a lot to this District when I joined its staff to manage Administrative Services.  Four years of performing financial audits with KPMG, thirty years running a successful business, seven years serving as a BUSD Board Member, and seven years serving as Burbank City Treasurer, managing a $450 million portfolio and the cash flow of the City, noting seven years of clean financial and compliance audits with no findings while meeting a myriad of complex regulations.  I am a Certified Public Accountant, a Chartered Global Management Accountant, and hold an MBA from the University of North Carolina at Chapel Hill.

The points below address some of the items in the Board Report:

1. The initial accrual of the retro payment in 2021-22 was made in accordance with governmental accounting standards and best practices, specifically the report-referenced Modified Accrual Basis of Accounting which states that liabilities are recorded when incurred. This is, in fact, what my staff and I did for the 2021-22 retro payment.
   
   The total accrual amount was based on the AB1200s the Board approved in May and June of 2022.  AB1200 was enacted in 1991 to prevent school district bankruptcies, and it requires that school districts make public the cost implications of negotiated settlements before approving employee contracts.  The costs were calculated jointly by Human Resources and Fiscal Services, based on the differential between current and new rates and applying the differential to employee data, and can’t be deemed “uncertain” as Mr. Cantwell claims in his report.
   
   The accrual of the retro, $6,933,095, should have been backed out of both the budget and general ledger in 2022-23 by Mr. Cantwell, Dr. Hill, and their staff, since it was expensed in 2021-22, and would have completely offset the amounts eventually paid in 2022-23.  This lapse caused expenditures in 2022-23 to be overstated by this amount.  This reversal was not reflected in Cantwell’s First Interim Report, presented to the Board on December 15 (where the accrual reversal should have been reflected and the 2022-23 budget updated), nor was it reflected in Cantwell’s 2^nd Interim Report presented to the Board on March 16.  I was no longer with the District to assist in the preparation and review of either of these reports. 
   
   
2. Tonight’s Board Report deflects attention from Cantwell and Hill’s two recent opportunities to properly account for the retro accrual and suggests the reversal of the accrual could have been updated reflected during the 45-Day Budget agenda item I oversaw at the August 4, 2022 meeting. That is misleading deflection.  At that meeting, the Board was provided with an update on increased revenues in the final adopted state budget only; expenditures were not addressed.  The Multiyear Projection was updated for the revenue amounts so the Board could see the fiscal impact of the increased revenues on District finances.  As an aside, the District would not have reversed the accrual until the amount owed was paid.  This item was for informational purposes only, with no Board action taken. 
   
   
3. The Government Finance Officers Association (GFOA) lists as one of its best practices that, “It may be prudent to set aside reserves for contract settlements, especially if the new terms are expected to be less favorable than those in existing contracts.” Contrary to best practices, against objections I raised when I first arrived, and ignoring the goal of transparency, the Superintendent instructed the Fiscal Services Director and me to book his cost projection of anticipated settlements directly into the current and future year budgets in the Multiyear Projections when fiscal reports were reviewed.
   
   
4. Several other budgeting errors are noted in the Board report. Best practice as set forth by GFOA dictates districts continuously monitor the budget throughout the year, not just when the budget is being put together.  Should actual results deviate from the budget in a significant fashion, adjustments need to be made.  It’s clear this monitoring wasn’t adequately occurring under Hill or Cantwell, with some of the reasons being that we’re in the most complicated fiscal environment we’ve ever seen for school districts, given the additional COVID-related and other one-time moneys calling for complex accounting, tracking, and reporting of expenditures, and further complicated by having a fiscal services staff that is stretched thin due to severe understaffing from vacancies and extended leaves and absences;  having to implement and learn a new financial accounting system; and the fact that the Fiscal Services Director was pulled away from her regular duties to conduct HR work and place her own job postings in job search engine Indeed and monitor and screen employment applications and arrange for submission to Human Resources through EdJoin, an employment platform used by the District. During my tenure, I held one-to-two-hour meetings with the Fiscal team every week and had an open-door policy where staff could stop in at any time with questions or concerns.  We also brought in a consultant to assist the Director with operational questions.  These practices were an important part of the Department’s budget monitoring activities, denoting shared responsibilities.  The Fiscal Services Department is not getting the consistent, ongoing support needed.

Board Members, I know firsthand what a tough job you have, and I wish you the best as you fulfill your responsibilities to the students, staff, and community of Burbank. 

Respectfully,

Debbie Kukta, CPA, CGMA, MBA
Lifelong Burbank Resident and Former BUSD Assistant Superintendent, Administrative Services