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December 11, 2009

DiNapoli: Poor Budgeting Leads to $1.6M Lunch Fund Deficit
and Cash Flow Problems at Albany City SD

Audit Identifies More Than $200K in Missed Savings and Waste by the District

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Albany City School District’s lunch fund incurred a $1.6 million operating deficit over four years because of poor budgeting, which contributed to cash flow problems for the district, according to an audit released today by State Comptroller Thomas P. DiNapoli. In addition, the audit identified $200,800 in missed cost savings and waste by the district.

“Now more than ever, local governments and school districts should be watching every taxpayer dime,” DiNapoli said. “The Albany City School District incurred unnecessary expenses on debt interest and has not taken steps to maximize energy efficiency cost savings. The district needs to work harder to protect taxpayer dollars and make sure education dollars deliver the best education possible.”

The audit found the district accumulated operating deficits in its school lunch fund in excess of $1.6 million from July 2004 to June 2008 because the district significantly overestimated lunch fund revenues each year. The district covered the deficits with subsidies and loans from the district’s general fund. As of June 2008, the school lunch fund owed the general fund $950,000.

As a result of the general fund’s subsidies and loans to the school lunch fund as well as $3.3 million in loans it made to the special aid fund, the district’s cash flow was negatively impacted and the district issued short-term debt to provide sufficient cash flow to pay for the district’s expenses. However, the debt was issued for a longer period of time than necessary which caused the district to incur unnecessary interest costs on the debt of at least $110,000.

DiNapoli’s audit also found the district did not properly protect its laptop computers and musical instruments from loss, misuse and theft. The district did not maintain proper inventories for the laptops and instruments. As a result, the district could not account for 16 laptops, valued at approximately $18,200, and 16 instruments, valued at approximately $20,200.

Auditors also learned the district failed to address energy efficiency goals. If the district had required computer users to power down their computers during idle periods and enabled power savings settings on all computers, the district could achieve nearly $47,000 in annual cost savings.

DiNapoli’s audit also found the district did not follow its procurement policy when awarding professional service contracts. The district did not solicit requests for proposals or competitive quotes when it procured almost $3 million in professional services from 21 consultants. Without the benefit of competition, the district cannot be assured it received quality services at the lowest price or that the contracts were in the best interest of taxpayers.

The audit also found the district:

  • failed to get 211 waivers for four retired law enforcement officers employed by the district until after auditors brought the requirement to the district’s attention;
  • improperly paid three employees a total of $5,400 for health insurance buybacks for which they were not eligible;
  • paid more than $35,000 to 24 employees for health insurance buybacks without adequate supporting documentation; and
  • did not adequately separate payroll processing duties and cash disbursement duties among employees, putting the district at risk for misuse or errors that could go undetected and uncorrected.

DiNapoli’s office recommends that district officials:

  • analyze the lunch fund’s operations and explore methods for increasing revenues so the fund can be self sustaining;
  • carefully project cash flow and issue short-term debt based on those projections only for the period of time that is necessary;
  • ensure periodic physical inventories are taken and compared with inventory lists and investigate and resolve any discrepancies between the inventories;
  • develop written policies for power management settings on school computers;
  • follow district policy and ensure that all employees provide adequate proof of comparable insurance and eligibility status on an annual basis for its health insurance buyback program;
  • recover payments from employees deemed ineligible for the buyback program;
  • enforce and monitor compliance with the district’s procurement policy; and
  • ensure necessary approvals are obtained prior to hiring retired public employees.

The district agreed with most of the audit’s findings and its full response is included in the audit.

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.

Click here for a copy of the audit.

Click here for a copy of Press Conference photo.


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