Millinocket town officials accused the head of the school department last fall of violating state law by withholding access to bank accounts that contained more than half a million dollars in student groups’ fundraising money and scholarship donations.
Dr. Joshua McNaughton, the superintendent of Millinocket schools, refused for three months to cede control of bank accounts containing a total of $630,000 to the Millinocket town government in violation of state law, according to treasurer Mary Alice Cullen and town attorney Dean Beaupain.
The accounts contained student activity funds that totaled about $130,000, and an account containing a $500,000 gift from a Stearns High School alum. The treasurer did not have access to the accounts and the town had no knowledge of the accounts’ existence for years, according to emails the Bangor Daily News obtained through a public records request. The town’s attorney called the accounts “illegal” in one email last November.
State law requires municipal treasurers to oversee all town finances, including school funds when the school department is part of the town, as it is in Millinocket. Treasurers can only make payments from town accounts through a warrant process at public meetings.
Millinocket town officials said the school department’s failure to disclose the accounts circumvented this process and kept them and the public in the dark about the source of the money and how it was being spent.
McNaughton has not been accused of any wrongdoing, and all of the funds are now on track to be overseen by the town. But the department’s resistance to taking direction from the treasurer is indicative of an enduring pattern of distrust between the 440-student school department and the town government, according to interviews with town officials and a school board member.
McNaughton refused to turn over control of the accounts beginning in August, when the firm RHR Smith & Company began auditing the town and school department and discovered them, according to the emails the BDN obtained.
At this point, the account with $500,000 is under the town’s control. The student activity funds, totaling $130,000, are supposed to come under the town’s control in June under an agreement reached at a Nov. 24 meeting with McNaughton, Cullen, Beaupain and the auditors.
The school department’s failure to report the accounts meant that “money has been handled without going through a public process, including a warrant process, [or] even being [on] public agendas, for people to be aware of what the money is being used for [or] where the money is coming from,” Town Council chair Steve Golieb said.
That way of operating predated McNaughton, who became Millinocket superintendent’s last July, but “he has chosen to continue that path, as opposed to recognizing and understanding the importance of following our charter,” Golieb said.
“I am concerned at this point, that I’m hearing that state statutes are not being followed,” said Erika Mackin, a school board member who was appointed in February. “For three quarters of a year, [McNaughton] had an opportunity to make this right, and he is avoiding it.”
McNaughton said lawyers for the school department and town were “working to resolve issues regarding the school accounts.” School board chair Warren Steward did not respond to two requests for comment.
The school department’s failure to report the accounts posed a legal liability because they had been filed under the town’s tax identification number, Beaupain said in emails to town officials. Although the accounts carried that number, they were never opened, controlled or authorized by the town treasurer’s office, and the money was not deposited into the town’s general account.
“If we are aware of illegal accounts, and we do not correct it, we will have knowingly contributed to an illegal process,” Golieb said, adding that if there was any wrongdoing, both the town and school department would be “severely at fault.”
Ron Smith, the accountant whose firm audited Millinocket, said the town council could be liable for a civil penalty if the accounts remained out of compliance with state law.
McNaughton said in emails to Beaupain and town officials that the school department had overseen its own accounts for decades and the town had not had a problem before Smith began his audit.
The school department twice pushed back against the town’s attempts to bring those accounts under its control.
“After consultation with our accountant and being informed that the school department is not violating any laws holding these accounts, I have made the decision that the accounts will remain in possession of the school department as they have been,” McNaughton said in an Oct. 4 email to Beaupain and Cullen.
The school board voted unanimously the following month against Cullen and Beaupain’s proposal to transfer control of two student activity accounts to the town.
McNaughton said the process would add more work and be time consuming, according to the board’s Nov. 16 meeting minutes. Other Maine towns allow their school departments to oversee their own accounts, and there are checks and balances and a process for withdrawal from the accounts, he added.
School departments may manage their own accounts but all expenditures and warrants must be approved by the school board in a public process, said Steven Bailey, the executive director of the Maine School Management Association. The Millinocket School Department had not sought warrants for the student activity funds or deposited that money in the town’s general account, Beaupain said.
The Millinocket school board later voted unanimously at its Nov. 30 meeting to allow the school department time to convert the student activity funds into nonprofit accounts until they were transferred to the town’s control on June 30. That vote came after the Nov. 24 meeting where McNaughton and the town agreed to transfer the funds to the town’s control.
Millinocket town manager Peter Jamieson said the town’s agreement with the school department would allow the booster clubs and student groups that had raised the funds to continue to have control of their own money.
“The only ask is that when planning to spend these funds, they be put on a warrant and approved by the Millinocket School Board through a proper procedure,” Jamieson said.
“Now that this issue is resolved, we hope to move forward with clear communication and strengthen the relationship between the Town and our local School Board.”