DiNapoli Audit: N. Syracuse CSD Inappropriately Stored
$3 Million Operating Surplus In Debt Service Fund
North Syracuse Central School District inappropriately shielded more than $3 million in a debt service fund according to an audit released today by State Comptroller Thomas P. DiNapoli.
“School district budgets are funded by local property taxpayers and state taxpayers,” DiNapoli said. “Now more than ever, school districts should be watching every taxpayer dime. Our audit recommendations will enable North Syracuse Central School District to do a better job overseeing its finances and protecting taxpayers.”
The audit found from 2001-02 through 2006-07 the district accumulated operating surpluses of approximately $3 million primarily because the district overestimated expenses. The district inappropriately transferred surpluses into a debt service fund to set aside money for future capital projects which is not in accordance with Education Law.
The district did not hold voter referendums to establish capital reserves for $3.25 million in surplus fund balance. Instead the district transferred the money to a debt service fund until it was needed to finance future capital projects. This is an inappropriate use of a debt service fund. Debt service funds should only be used to pay for existing debt service, not to fund future capital projects.
Education Law stipulates that money for capital projects should not be set aside until a voter referendum approves the reserves to finance capital projects. Although the district ultimately did seek voter approval to expend most of these moneys on various capital improvements, the district did not hold a voter referendum to approve the use of $2.3 million in the debt service fund until more than seven years after the first transfer of operating surplus into the debt service fund.
DiNapoli’s audit also found the district did not adequately restrict user access in the payroll system based on employees’ job responsibilities. The district also failed to properly certify payroll, properly review cancelled payroll checks and monitor computerized payroll transactions. The lack of adequate procedures increases the risk that inappropriate payroll transactions, error and irregularities could go undetected and uncorrected.
DiNapoli’s office recommends that district officials:
- discontinue transferring money from the general fund to the debt service fund for future capital projects;
- properly establish a capital reserve fund in accordance with Education Law;
- obtain voter approval to legalize the money in the debt service fund;
- develop proper procedures for payroll and adequately segregate payroll duties among employees.
The district generally agreed with audit recommendations. As a result of the audit, the district put capital projects before school district voters who approved using the debt reserve fund to finance the projects. The district’s full response is included in the audit.
To view the audit, visit: http://www.osc.state.ny.us/localgov/audits/schools/2009/northsyracuse.pdf.
School District Accountability
In order to improve accountability of the state’s schools, DiNapoli’s office will audit all of New York’s school districts and Boards of Cooperative Educational Services by 2010. The State Comptroller’s office has completed 695 school audits and approximately 35 school audits are currently underway.