FOR RELEASE:

DiNapoli: Five Years of School Audits Identify $880 Million in
Excess Funds, Missed Cost Savings & Questionable Payments

DiNapoli Proposes Legislation to Increase Transparency &
Provide Mandate Relief to Schools

Audio Available

State Comptroller Thomas P. DiNapoli’s office identified $880 million in excess funds unnecessarily held in reserve accounts, missed cost savings and questionable payments by school districts across the state, according to a report DiNapoli released today. DiNapoli’s office completed 733 audits of all of the state’s public schools and Boards of Cooperative Educational Services from August 2005 through February 2010, before the statutory deadline of March 31, 2010.

“Taxpayers have the right to know if the school districts are managing their money the right way and we found a majority are trying to do this,” DiNapoli said. “Our audits have increased transparency by giving taxpayers an objective look into school district finances. We’re holding school officials accountable. And we’ve protected taxpayers’ money.

“Over the last five years, my auditors identified $615 million that districts unnecessarily set aside at taxpayers’ expense. That’s money that could have been used to lower property taxes. Now more than ever, every dime counts. Our audits are helping protect those dimes for taxpayers.”

DiNapoli’s auditors found 285 school districts and BOCES across the state improperly retained a total of $615 million in taxpayer money in various reserve accounts, with the majority of the money held in employee benefit accrued liability reserves (EBALR). This total reflects the amount of money in the reserve funds that exceeded reasonable estimates of the districts’ anticipated liabilities for the reserve funds.

In addition, DiNapoli’s audits identified:

• $140 million in missed Medicaid reimbursements;
• $25 million in improper contract payments;
• $24 million in cost savings and revenue enhancements that school districts could implement;
• Nearly $18 million in fraud at 19 school districts;
• $7.7 million in inappropriate separation payments and other payments to school administrators and other employees; and
• $49.4 million in contracts that did not benefit from competition.

DiNapoli also identified several opportunities for legislation that could increase transparency and accountability in school district finances and assist districts with long-term financial planning. These legislative proposals would provide taxpayers with more information on how school districts spend taxpayer money.

DiNapoli’s proposed legislation would;

• require boards of education to authorize an increase in funding of reserve funds;
• require school districts to include a schedule of all reserve funds in the districts’ public budget notices;
• enable school districts to create a tax stabilization fund to help mitigate tax increases greater than 2.5 percent of the tax levy;
• grant authority to school districts to set aside money to fund future retiree healthcare costs by establishing other post-employment benefits (OPEB) trusts;
• allow school districts to transfer excess EBALR funds to the operating fund or to an OPEB trust; and
• allow school districts to establish reserve funds to pay for Teachers’ Retirement System employer costs.

The audits also revealed opportunities for mandate relief for school districts and other improvements to:

• allow districts to create the position of deputy claims auditor;
• permit districts with 10,000 or more students to audit samples of claims rather than every claim;
• allow districts with fewer than 1,000 students to forego the requirement to establish an internal audit function; and
• authorize districts to coordinate procurement credit card purchases through BOCES.

DiNapoli said his office will continue to rigorously audit school districts. Internal control audits will still be performed, and auditors will also focus on identifying potential efficiencies and cost savings in school district operations. As part of this effort, auditors will examine transportation, purchasing, shared services opportunities, energy savings, special education and school Medicaid reimbursement. Auditors will also review school districts’ controls over information technology specifically assessing districts’ vulnerability to unauthorized access.

DiNapoli presented his findings to the Board of Regents today in Albany.

Click here to view the report, “Making the Grade: Five Years of School District Accountability.”

Click here for a copy of Press Conference photo.

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