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Audit Objective

Determine whether the Newfane Central School District’s (District) Board and District officials properly managed fund balance and reserves.

Key Findings

The Board and District officials can better manage fund balance and reserves.

• The practice of annually appropriating fund balance that is not needed to finance operations and overstating appropriations concealed the actual surplus fund balance.
  • When unused appropriated fund balance and encumbrances are added back, surplus fund balance exceeded the limit each year by $8.1 million to $9 million, or 26 to 28 percentage points, which exceeded the 4 percent statutory limit.
• $13.4 million was improperly restricted in two reserves:
  • $12.6 million in the employee benefit accrued liability reserve.
  • $800,000 in the debt service reserve.

Key Recommendations

• Reduce surplus fund balance to comply with the legal limit and use the excess funds in a manner that benefits taxpayers.
• Return funds improperly restricted to surplus fund balance in compliance with applicable statutes.

District officials generally agreed with our findings and recommendations and indicated they have initiated or planned to initiate corrective action.