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June 18, 2009

 

DiNapoli: Poor Budgeting Practices at Kenmore-Tonawanda

UFSD Lead to $22 Million in Excess Funds

Poor budgeting practices at Kenmore-Town of Tonawanda Union Free School District allowed the district to accumulate more than $22 million in excess funds that should be used to benefit taxpayers by paying for one-time expenditures, reducing debt or reducing the tax levy, according to an audit released today by State Comptroller Thomas P. DiNapoli.

“Accurate budgeting is essential for a school district to have a strong financial base and make sure taxpayers are not paying more property taxes than necessary,” DiNapoli said. “Kenmore-Tonawanda Union Free School District needs to accurately estimate its revenues and expenses, and stop overfunding reserves.”

The audit, which covered July 2006 to October 2008, found that the district routinely overestimated expenditures by a total of $43.5 million from 2003-04 through 2007-08. For example, in 2007-08 the district budgeted $29.9 million for employee benefits even though the district’s own cost schedules estimated the costs for these expenditures to be $20.5 million.

The district also routinely underestimated revenues, primarily state aid and interest earnings, by nearly $23 million over the same five-year period. These inaccurate budget estimates caused the district’s revenues to exceed expenditures by $13.4 million.

Auditors determined the district exceeded the statutory limit for unreserved fund balance from 2003-04 through 2006-07 by one to two percent each year. To stay close to this limit, the district overstated liabilities, systematically increased reserve funds and trust accounts by $17.3 million over the five-year period, and appropriated $10 million of fund balance annually but never used the money. Through these actions, the district restricted more than $22 million that should have been used to benefit taxpayers.

DiNapoli’s audit also found problems with the district’s procurement practices, including:

  • $800,000 in purchases of goods and services that the district could have used more formal procurement methods to potentially achieve cost savings for taxpayers;
  • $300,000 in purchases that did not comply with competitive bidding requirements and district policies; and
  • improper use of blanket purchases orders to circumvent procurement requirements.

DiNapoli’s office recommends that district officials:

  • prepare budgets that accurately reflect estimated revenues and expenditures;
  • use surplus funds in a manner that benefits taxpayers such as to pay off debt, finance one-time expenditures or reduce property taxes;
  • ensure that reserve funds are properly established and maintained;
  • properly recognize and report liabilities; and
  • monitor and enforce compliance with the district’s procurement policies and state law.

The district’s full response is included in the audit. 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 school districts and Board of Cooperative Educational Services by 2010. The State Comptroller’s office has completed 600 school audits and approximately 155 school audits are currently underway.


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