WINTHROP — The Town Council and the School Board appear as far apart as ever when it comes to an agreement on a new school budget.

While there are multiple areas of dispute, including the structure of health insurance coverage for school employees and creation of policies to regulate third-party bank accounts, the crux of Monday’s council debate was control of nearly $70,000 left over in high school student accounts.

Both sides agree on one thing: The money, or at least most of it, eventually will be given to the town. It’s just a matter of how it gets there.

“Sixty-nine thousand dollars should be returned to the school coffers, which in turn will reduce the deficit and repay the town coffers,” town auditor Ron Smith said. “I really think you guys are complicating it.”

The protracted debate at times turned heated as both sides argued for their right to control the money and questions arose about how the school board wound up with such steep deficits in summer salaries and food service. Tensions peaked when School Board member Isaac Dyer claimed Council Chairman Kevin Cookson’s effort to stall the budget process has been “vindictive” and accused of Cookson of spreading “innuendo” and “threatening” school board members with criminal prosecution.

Cookson, in turn, criticized board members for prematurely “publishing articles” claiming there were no illegalities or malfeasance regarding the problem school accounts during the course of an ongoing criminal investigation. Cookson declined to elaborate on that investigation, but said it is incomplete and involves one of the problem accounts identified in a special auditor’s report earlier this year.

Tension between municipal and school officials has mounted since June, when an auditor flagged problems with the school spending accounts. Town councilors froze the accounts to prevent spending without council approval.

Councilors in July rejected the school board’s 2013-14 budget proposal, which was about $500 less than the 2012-13 budget. Councilors said they could not approve a budget until they receive the auditor’s final report, a stance Smith has supported. In the meantime, the school system is operating on a 2012-13 school budget; but Gary Rosenthal, superintendent of Alternative Organizational Structure 97, has limited spending to essential items until a new budget is passed.

In October, Smith delivered a report that identified several problems in the town’s finances, including deficits in school spending, infrequent account reconciliations, checks not appearing on Town Council warrants and 22 third-party bank accounts with the town’s tax identification number on them.

Smith said at the time the lax accounting practices, particularly the outside accounts, created opportunities for abuse. No allegations of wrongdoing have emerged from Smith’s audit.

The town and the School Board have worked to correct the problems identified in Smith’s report. Rosenthal on Monday presented a budget that closely mirrored the original version crafted in June, hoping this time councilors would pass it along for voter approval. That did not happen.

“We’ve made all the changes and adjustments everyone asked us to make,” Rosenthal said. “I really believe we’re ready to move forward with this budget.”

There was little discussion about the overall budget, however. Debate instead focused on the nearly $70,000 left over in the student accounts, and other accounts, some of which was fronted by the town.

The school system over a number of years has borrowed a total of $645,000 from the town to pay summer salaries and deficits in the lunch program. The school board wants to take $60,000 of the $70,000 left over in student activity accounts and pay down that debt. The remaining money would be put into a contingency fund to take care of athletic fields, all of which are in great need of maintenance, Rosenthal said.

The board hopes to pay off the remaining $585,000 over the next nine years by applying money currently being paid on other loans as those loans are paid off.

The finance committee tasked with examining the problem accounts identified in Smith’s audit endorsed the plan to use the money to pay down the debt and for capital improvement.

“We came up with a good solution,” Councilor Lawrence Fitzgerald said.

However, Cookson said unless the money is spent on extracurricular activities as intended, it should be turned over to the town and added to undesignated funds. Cookson said the council voted in 2011 specifically to raise money for athletics.

“I think putting $60,000 of that money to summer salary or a deficit in the hot lunch program is a violation of the board’s vote in April 2011,” Cookson said. “If the money is unspent, this board decides where it goes.”

Moreover, Cookson said, there is disagreement and confusion about how much money will be spent on debt reduction. He said the Interfund Loan Agreement, which spells out plans for the debt repayment, claims the School Board will use only $50,000 of the $70,000 to pay down debt to the town and does not specify how the remaining money will be spent. Cookson said Monday’s meeting was the first he had heard about creating a contingency fund to maintain athletic fields.

“We know we owe you the money,” Rosenthal said. “The question is, how do we pay it back?”

Attorney Bill Stockmeyer has advised the board that state law stipulates the money must remain with the school, Rosenthal said, but Town Attorney Lee Bragg said ownership of the money is debatable. Either way, Bragg noted, the money will be given to the town.

“Is it school money, or has the school just happened to become the custodian of town money?” Bragg asked. “The council, in the end, can have it any way it wants it. You don’t need to put a fine edge on it.”

Councilors expressed other concerns as well, notably the ongoing yearly trend of underbudgeting for the lunch program and failing to budget for summer salaries, which led to the large debt to the town. Rosenthal said the proposed budget includes full funding for summer salaries and that the lunch program should finish the year in the black.

The proposed budget also fails to introduce an employees’ co-pay for health insurance. Councilors have demanded the school board make the co-pay part of its ongoing contract negotiation with school employees, but board members have claimed such demands are illegal in negotiations. School Board Member Virginia Geyer said the board already has made significant cuts to health insurance premiums through outsourcing and staff reductions.

“Our package is cheaper and better for employees than what you did in the municipal budget,” Geyer said.

But Councilor Sarah Fuller said the council’s demand is intended create parity with municipal employees, who share their premium costs.

“We want employees to contribute something to health insurance,” Fuller said. “It’s not just about the bottom line number.”

Craig Crosby — 621-5642[email protected]