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Warwick misses another deadline amid financial turmoil

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Warwick City Hall

WARWICK, R.I. (WPRI) – The state’s top finance officials are increasingly concerned about Warwick’s money problems, as the city has yet again extended a deadline to submit a financial audit to the state.

The R.I. Auditor General’s Office on Friday confirmed Warwick’s deadline to file its financial statements for fiscal 2017-18 – originally due Dec. 31 – has been extended for at least a fourth time. The new deadline is the week of July 23, three weeks after the city starts its fiscal 2019-20 budget.  

“We continue to be concerned and are actively monitoring the situation,” said Auditor General Dennis Hoyle.

Warwick Mayor Joseph Solomon said required documents for the audit have been filed to outside auditing firm BlumShapiro, and he’s confident the city will not miss another deadline.

“I’m very disappointed that an extension had to be sought in this matter, simply because most, if not all, of the material for the audit has already been placed in the hands of BlumShapiro,” he said. “I wanted it in yesterday.”  

A spokesperson for the city emphasized that Warwick has filed its audit late every year since 2007, but was unable to say whether it had ever been unfinished this late in any of those years.

The delayed reporting is part of a larger concern from state leaders that’s been growing for weeks, according to documents obtained by Target 12.

R.I. Department of Revenue Director Mark Furcolo and Hoyle sent a stern letter to Solomon and Superintendent Philip Thornton on June 6, saying the city’s finances were problematic and the missing audit was part of the issue.

“The lack of final audited operating results and fund balances impacts the reliability of projections for fiscal years 2019 and 2020,” the pair wrote.  

READ: Joint letter to Warwick city officials

The letter also focused on the Warwick School Department, which has grappled with an operating deficit for the current fiscal year that could potentially spill over into the next budget starting in 10 days.

The nearly $166 million allocated for schools accounted for more than half of the city’s $323 million operating budget, according to Solomon’s proposed budget for fiscal 2019-20. But funding for schools in recent years has stayed relatively level, which school officials attribute to the current gap between revenue and spending.  

The projected school deficit for the current fiscal year totals about $4 million, according to Thornton, and the School Committee has moved to cut nearly $8 million to balance next fiscal year’s budget beginning in fewer than two weeks.

The cuts included after-school programs such as sports, evoking outrage from student athletes and their parents. Thornton is hopeful the city will give them more money.

“As many of these budget cuts are harmful to the district, it is hoped that if more funds are directed to the schools, then many of these budget cuts can be reversed,” he said.

Solomon told Target 12 on Friday the city and schools have entered into mediation to try and come up with a solution. The goal is to resolve the issue before school starts in September.

School officials earlier this year considered withdrawing funds from a pension plan covering non-certified school employees to balance its current budget. A School Committee lawyer warned against it, which was reinforced by the state’s top financial leaders.

“We would strongly recommend that funds not be withdrawn from the pension fund to resolve the deficit,” Furcolo and Hoyle wrote in their letter. “We urge both the city administration and the School Department to work cooperatively to resolve the budget differences.”

Thornton on Friday made it clear the schools would not withdraw pension funds to cover the budget shortfall for the current fiscal year.

Solomon has pointed out that the city was told earlier this spring it had no further financial obligation to the schools, though that was before the pension transaction was taken off the table.

For now, local and state finance officials are working together to try to get Warwick’s finances in order. But in the event the situation worsens, the state has certain tools to intervene.

After Central Falls filed for receivership in 2010, the General Assembly passed the Financial Stability Act, giving the state authority to take over local financial decisions under certain circumstances.

Hoyle told Target 12 he didn’t think the city was quite at that point and Department of Revenue spokesperson Paul Grimaldi agreed.

“If it got dire, we’d have to determine whether to move forward with the Fiscal Stability Act,” Grimaldi said. “But we’re not yet at that point.”

During a taping Friday of WPRI 12’s Newsmakers, Sen. Erin Lynch Prata, D-Warwick, said she had not spoken directly to Solomon about the city’s financial troubles, but acknowledged it is a concern.

“I don’t know necessarily that we’re at that point where they need to intervene. I’m not as up to date on the specifics as I wish I was. … If and when I think that’s something that’s necessary that’s certainly a discussion I’ll have with my leader,” she said.

Despite the ongoing financial challenges, Solomon is bullish about where the city is heading. For now, he said, his goal is to get after-school programs including sports back on track, while also finding a way to close the gap between spending and revenue.

“By eliminating the existing deficit, we will create a more solid and predictable foundation to build upon,” he said.

Eli Sherman (esherman@wpri.com) is a Target 12 investigative reporter for WPRI 12. Follow him on Twitter

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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