Butkovitz unconvinced school district 'a going concern'

Controller Butkovitz: Unconvinced about district's viability.
Controller Butkovitz: Unconvinced about district's viability.
Posted: February 01, 2012

CITY CONTROLLER Alan Butkovitz fired off another letter to the school district yesterday, hinting that his office would call the district's viability into question in an upcoming auditor's report.

Doing so would likely affect the district's bond ratings, financial analysts said, making it more expensive for the district to borrow money.

The controller's office has reviewed district information, which "provides substantial doubt among my professional audit staff, and strongly indicates a troubled organization," according to the letter.

The letter was a response to Thomas Knudsen, the district's newly appointed chief recovery officer, who laid out for Butkovitz last week the district's tentative plans to improve its financial situation.

District spokesman Fernando Gallard said the district would have no further comment.

The district faces a $61 million budget deficit this year. The School Reform Commission set forth $100 million in options to close that gap and hired Knudsen at $150,000 for six months to execute the plan.

Butkovitz cited comments from SRC Commissioner Feather Houstoun, head of the SRC finance committee, who warned last month that the district won't be able to pay employees in July if the measures aren't taken.

Butkovitz said Houstoun's statements indicate there's some doubt the district will be able to "continue as a going concern" beyond the current fiscal year.

Stephen Mullin, a principal at the financial consulting firm Econsult, said the controller should note any concern in an auditor's report.

"Good bond rating analysts will already know the dire situation and will be watching very carefully how the School Reform Commission is going to address it," he said, "and the language in the audit is going to be secondary."

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