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January 24, 2008


DiNapoli: Reducing Tax Levy Could Have Prevented Bridgehampton SD’s High Unreserved Fund Balance

District’s Unreserved Fund Balance Eight Times the Legal Limit

Bridgehampton Union Free School District accumulated an undesignated fund balance of $1.7 million, eight times the legal limit, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“To protect taxpayers, the law limits the amount of undesignated funds that school districts are allowed to accumulate,” DiNapoli said. “If there’s a specific need for these excess funds, the district should identify what that need is and establish an appropriate reserve fund. If the district does not do this, the money should be used to reduce taxes in the next year’s budget.”

During the audit period July 2005 to October 2006, state law limited the amount of a school district’s undesignated funds, specifically the district’s undesignated, unreserved fund balance, to be no greater than two percent of the district’s appropriated budget. The district’s appropriated budget during the audit period was $9.8 million. The district’s undesignated, unreserved fund balance of $1.7 million represented 17 percent of its budget appropriations.

Auditors learned district officials purposely allowed the unreserved fund balance to accumulate to help finance a construction project, even after taxpayers voted down two attempts by the district to establish capital reserve funds.

Auditors found that the board could not properly monitor appropriations and revenue because it was not provided periodic financial condition reports from district officials. In addition, the board overestimated appropriations for programs for students with disabilities and employee benefits by a total of $2.6 million from 2002 to 2006.

The audit also discovered the district’s procurement policy contradicted General Municipal Law because the policy inappropriately exempted contracts for certain types of work from complying with competitive bidding requirements. Subsequently, the district awarded a $28,503 contract for electrical work without publicly advertising for bid. In addition, the district split $19,790 in furniture purchases to avoid complying with competitive bidding requirements.

The audit found the district missed out on $350,000 in revenue by not following its own policy to collect tuition from non-resident students.

The audit recommends that school officials:

  • develop a plan to reduce the unreserved fund balance;
  • take steps to ensure necessary financial information is provided to the board;
  • remove exemptions from competitive bidding requirements from its procurement policy; and
  • follow policies on charging tuition for non-resident students.

The district agreed with the audit’s findings and committed to taking corrective action. 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 350 school audits and approximately 200 school audits are currently underway.

Click here for a copy of the audit.

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