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April 17, 2009

Lancaster School District Overfunds Reserves

Money Could Have Been Used to Reduce Taxes or Debt

The Lancaster Central School District has at least $11 million in surplus funds that should be used to benefit taxpayers by paying one-time expenditures, reducing debt or cutting the tax levy, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“While saving money for a rainy day is usually a good idea, school districts should not hold millions of dollars at the expense of taxpayers,” DiNapoli said. “The Lancaster Central School District needs to budget better and stop overfunding reserves.”

DiNapoli’s auditors found the district’s budgetary practices have led to operating surpluses that have been put in various reserve funds. For example, the district overestimated teaching appropriations by more than $1 million in each of the fiscal years from July 1, 2004 to June 30, 2008. As a result, cumulative operating surpluses have totaled about $8.4 million over the last three fiscal years.

Auditors determined at least $2 million of the district’s $10.2 million employee benefit accrued liability reserve balance was not needed because the district wouldn’t have to spend the money for at least 10 years.

The district also has not been using the debt reserve, which had a balance of $8.2 million as of June 30, 2007, to pay off debt. Instead, the district has been paying those expenses from the general fund tax levy.

Auditors found the district also improperly reported certain projected costs, which effectively reduced the unreserved, unappropriated fund balance by approximately $1.2 million at June 30, 2007.

Auditors also discovered the district did not follow its procurement policy requiring bids or price quotations for certain purchases.

The audit recommends the school district:

  • Reduce the balance in the employee benefit accrued liability reserve to a level consistent with contractual requirements and that realistically reflect expected future costs;
  • Use the debt reserve to pay debt service costs; and
  • Analyze year-end costs to ensure they are reasonable.

District officials generally agreed with the recommendations and indicated they have taken or plan to take corrective action.

Click here for a copy of the audit and the district’s response .



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