Roosevelt School District Deficit Projected
to be $12.3 Million by End of School Year
DiNapoli Urges Development of Long-Term Plan
to Address Systemic Financial Problems
Asks State for Additional Funding to Hire More Auditors to Look at Schools
The Roosevelt Union Free School District will have an accumulated deficit of nearly $12.3 million by the end of the 2006-07 fiscal year unless significant action is taken to eliminate unnecessary spending and control costs, according to an audit released today by New York State Comptroller Thomas P. DiNapoli.
The audit, which covered the period of July 2004 to November 2006, found that the primary causes of the deficit were overspending of budget items, repeated unrealistic estimates of state aid revenue, poor budgeting and financial management practices, and inadequate long-term planning. The school district’s operating budget is $63.1 million in 2006-07.
“The Roosevelt School District continues to experience serious deficits and cash shortages that stem directly from a failure to budget accurately and monitor spending,” DiNapoli said. “Our audit shows an accumulated deficit that is so large that it threatens the district’s ongoing operations, and it cannot be sustained. Continuing on this path, the district will run out of cash and won’t be able to pay its bills. These problems must be addressed now. It is essential that a realistic, long-term financial plan is developed to get the district on the right track.”
Roosevelt has struggled with fiscal issues for many years. In March 2002, the state legislature removed the school board and authorized the Commissioner of Education to appoint another board. In addition, the state legislature authorized the district to issue debt for approximately $5.8 million and required the district to submit its proposed budget to the Office of the State Comptroller (OSC) for review annually. In these budget reviews, OSC warned the district about overestimating state aid revenues and about using one-shot revenues to finance operations. The district did not provide OSC with 2006-07 budget information, as it is legally required to do, so auditors did not perform a review of this year’s budget prior to its adoption.
In September 2006, in response to the district’s deteriorating fiscal condition, the Commissioner of Education requested that OSC conduct an audit, which started immediately.
- Deteriorating financial condition. The district ended fiscal year 05-06 with a $6.2 million deficit equal to more than 11 percent of the district’s general fund. Auditors estimated that the district will sustain an operating deficit of $6.1 million for 2006-07, for a total accumulated deficit of $12.3 million.
- Inadequate long-term financial plan. The district submitted a five-year financial stabilization plan, required under the deficit-financing legislation, four years after it was required by the deficit financing legislation. Auditors attributed the district’s lack of proper planning and failure to identify financial issues as a major cause in the district’s deteriorating financial condition.
- Use of capital funds to pay for current expenses. Because of severe cash flow issues, the district used $16 million from its capital projects fund to cover operating costs. The district repaid about $9 million of this money from a $21 million Revenue Anticipation Note (RAN). The district has to repay the RAN in June 2007, but has not set aside the required funds to do so.
- No fund balance to cover shortfalls. $6.1 million in fund balance, the unused money carried over from previous years, was used for the 2004-05 and 2005-06 fiscal years to finance operations, leaving the district without any fund balance to offset expenditure and revenue shortfalls. The board appropriated $39,520 of fund balance for the 2006-07 budget even though this fund had already been depleted.
- Inaccurate state aid projections. Repeated errors were made in budgeting for state and federal aid, and auditors warned the district of this problem during their 2005-06 budget review. For instance, in the 2005-06 fiscal year, the district budgeted $38.5 million for state and federal aid but only received $36.3 million. The district used the preliminary state aid figure and did not adjust its budget when the final figures were provided by SED. For the 2006-07 fiscal year, the district again over budgeted state aid by $3.2 million.
- Poor budgeting process. The district did not have a formal procedure to prepare the budget nor did it analyze actual expenditures from the previous years to accurately budget for the upcoming year. For instance, the district underestimated personal services costs by a total of $5.6 million over a two-year period because, although it cut budgeted expenses, it did not actually reduce the staffing it said it would to achieve these budget savings.
Auditors made 10 recommendations to improve operations such as updating the required five-year long-term stabilization plan, eliminating all non-critical expenses for the rest of the year, developing formal budgeting procedures, leaving some fund balance for unexpected expenses, and improving procedures for monitoring expenses. The district agreed with the audit findings and indicated in its response to the audit that it was currently acting on the auditor’s recommendations. The district’s full response is included in the audit.
DiNapoli has asked for $2.7 million to hire more staff to audit schools. Legislation passed in 2005 gave OSC funding to hire 89 new staff, 86 of these staff have been hired, to audit all of the State’s 832 school districts, Board of Cooperative Educational Services (BOCES) and charter schools by March 31, 2010. The funding that OSC asked for in 2005 was based on auditing only the state’s 700 school districts, not the charter schools and BOCES as well.
“As State Comptroller, I am committed to ensuring that taxpayer money is being spent responsibly by our schools,” DiNapoli said. “Our audits have significantly improved how schools operate in our state, and it is vital that this good work continue.”
OSC is scheduled to review the district’s 2007-08 budget.
The district operates five schools and has an enrollment of 2,800 students and about 500 employees.
Click here for a copy of the audit.