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January 20, 2009

 

DiNapoli: North Collins CSD Overestimated Expenses by
$4.3 Million and Overfunded Reserves by $3.4 Million

District Could Have Reduced the Property Tax Levy

Over three years the North Collins Central School District overestimated expenses by $4.3 million and used the surplus to overfund reserve accounts by more than $3.4 million. This surplus could have been used to significantly reduce the district’s property tax rate, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“Everyone wants to save for a rainy day but it is unacceptable for school districts to hold money at the expense of local taxpayers,” DiNapoli said. “The North Collins Central School District needs to
accurately estimate its expenses, stop overfunding reserves and use the money to reduce the tax levy or pay for one-time expenses.”

The audit, which covered July 2006 to March 2008, found that the district did not adequately monitor its budget process or reserve funds. During that period, the district overestimated expenses by $4.3 million. While the district did apply about $1 million of the surplus to the next year’s budget, the district still had more than necessary in reserve funds.

In addition, the district increased the tax levy by more than 10 percent from fiscal years 2004-05 through 2006-07. As a result, the district’s taxpayers paid more than necessary to sustain the district’s operations.

The district used the surplus to overfund various reserve funds by more than $3.4 million collectively. The reserve funds include:

  • employee benefit accrued liability, which is overfunded by $1.4 million and established by the district to fund retiree health benefits even though that is not an acceptable use of this reserve according to the General Municipal Law;
  • retirement contribution, which had a balance of $327,766 that the district has never used to fund these expenses and instead raised taxes for this purpose in the district’s general fund;
  • unemployment insurance, which had a balance of $206,464 that the district has never used to fund these expenses and instead raised taxes for this purpose in the district’s general fund;
  • bonded debt, which contained $1.5 million while the district instead used $7.8 million from its general fund to pay for debt service over six years.

In addition, the audit found the district failed to adequately oversee its transportation department. The district did not award a bus repair and maintenance contract to the lowest bidder and did not adequately justify why it had not done so. As a result, the district may be paying more than necessary for the services.

The district also did not enter into a written contract with the vendor, ask the vendor to document expenses, authorize the vendor to make each repair or maintain repair records. The district’s lack of oversight resulted in $13,500 in excessive or unnecessary expenses.

DiNapoli’s audit also found the district:

  • did not adequately monitor access to fuel pumps or fuel usage;
  • purchased a fuel tank and installed it on the transportation vendor’s property;
  • did not properly segregate financial duties among staff; and
  • did not properly audit claims before they were paid.

DiNapoli’s office recommends that district officials:

  • develop realistic expense estimates and closely monitor its finances;
  • use excess fund balance to reduce taxes or pay for one-time expenses;
  • review all reserves and reduce their amounts to reasonable balances;
  • ensure competitively bid contracts are awarded in accordance with the law and district policies;
  • ensure there is proper documentation before paying claims; and
  • properly restrict access to fuel.

District officials generally agreed with the audit’s recommendations and have already initiated corrective action to address some of the auditors’ concerns. Click here to view 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 and charter schools by 2010. The State Comptroller’s office has completed 550 school audits and approximately 180 school audits are currently underway.

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