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February 20, 2008

DiNapoli: Better Financial Reporting Could Have Prevented a $2M Fund Balance Deficit at Hamburg CSD

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Hamburg Central School District officials did not adequately monitor its finances and ended the 2006-07 fiscal year with a $2 million fund balance deficit, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“District officials were aware of significant financial condition problems but chose not to disclose them to the school board,” DiNapoli said. “When school officials identify a problem that could hurt both taxpayers and students, it is imperative to notify school board members so appropriate fiscal decisions can be made. The board and district officials must address this breakdown in reporting immediately.”

The audit found the former superintendent and the administration failed to provide the board with financial statements that highlighted a fund balance deficit of more than $200,000 on June 30, 2006. The district only recorded appropriations in the accounting system and neglected to enter estimated revenues. Therefore, there was no data to compare to actual revenue recorded in the accounting system in order to monitor financial activity. The 2006-07 budget relied on using $875,000 in fund balance that did not exist. The continued reliance on the use of fund balance and certain revenue shortfalls increased the deficit to about $2 million at the end of fiscal year 2006-07.

Despite being aware of a projected $1 million deficit in April 2007, the business administrator chose not to report this information to the board because he believed there was no established process to do so.

The audit discovered the district’s financial condition deteriorated because the district:

  • did not have proper accounting procedures in place;
  • failed to establish policies and procedures to ensure the board received accurate and adequate financial information; and
  • did not address the developing financial condition problems in a timely manner.

DiNapoli’s audit recommends that district officials develop a written plan to address the district’s remaining general fund deficit. In addition, the audit calls upon the board to immediately develop and adopt realistic balanced budgets, require timely and complete financial information be presented for review throughout the year and that it should implement a multi-year financial plan.

District officials took certain actions that reduced the projected fund balance deficit at June 30, 2007 to approximately $1.2 million. However, District officials still need to continue to address their financial condition problems. The district’s 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 834 school districts, Board of Cooperative Educational Services (BOCES) and charter schools by 2010. Auditors review the school districts’ internal controls and make recommendations on how internal controls can be improved. The State Comptroller’s office has completed 365 school audits and approximately 200 school audits are currently underway.

Click here for a copy of the audit.




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