New York State Comptroller Thomas P. DiNapoli today announced his office completed audits of the Bellmore-Merrick Central High School District, Gouverneur Central School District, Irvington Union Free School District, Newark Central School District and the Port Jervis City School District.
State Comptroller DiNapoli has made it a priority to audit school district, BOCES and charter school finances and operations to ensure money is being spent appropriately and effectively. The Comptroller’s audits are designed to help schools improve their financial management practices and ensure proper policies and procedures are in place to protect taxpayer dollars from waste, fraud and abuse. New York’s school districts annually spend approximately $60 billion in federal, state and local funds.
For additional background or a comment on a specific audit, please contact Brian Butry at 518-474-4015 or email: [email protected].
The board adopted budgets for fiscal years 2012-13 through 2014-15 that appropriated a total of $17.4 million in fund balance and $7 million in reserve funds to finance operations. However, because the district overestimated expenditures by $21.3 million over the three-year period, most of the appropriated fund balance was not used. As a result, the district’s unrestricted fund balance has exceeded statutory limits. When adding back unused appropriated fund balance, the district’s recalculated unrestricted funds averaged almost 8 percent of the subsequent year’s appropriations. Additionally, district officials did not have proper documentation for establishing and using two of four reserve funds totaling $1.1 million and for the audit period, the district used only $632,640 of the almost $7 million of appropriated reserve funds.
The board consistently overestimated general fund appropriations by an annual average of $3.2 million, or 10.8 percent, from fiscal years 2012-13 through 2014-15. This resulted in most of the fund balance appropriated in the general fund not being used to finance operations. The district’s reported unrestricted fund balance has exceeded the 4 percent statutory limit in two out of the last three fiscal years. When the unused appropriated fund balance is added back, the recalculated unrestricted fund balance has averaged more than 16 percent of the ensuing year’s appropriations Also, fund balances reported in the school lunch fund exceeded the maximum amount allowed by federal regulations by an average of 43 percent.
The board has developed an acceptable-use policy and an email policy. However, the acceptable-use policy does not address computer users who do not use the district’s computers for instructional purposes or the inappropriate use of IT equipment. In addition, the email policy allows for the use of personal email through external mail servers. Further, district staff are able to access websites such as online shopping, social networking sites, travel and automobile sites that are unrelated to their district duties and violate the acceptable-use policy because the district’s web filtering software is not configured to block access.
Auditors found that the board and district officials regularly prepared and adopted unrealistic budgets. The last four fiscal years’ budgets were comprised of overestimated appropriations and underestimated revenues, resulting in aggregate operating surpluses totaling $719,000. Therefore, $2.06 million in appropriated fund balance was not used to financial operations. Overall, district officials improved their budgeting practices with the adoption of the 2016-17 budget by budgeting based on historical trends. District officials also established reserve funds to prepare for future contingencies. However, they did not always include the funding of reserves in the budgets voted on by taxpayers. Four of the district’s seven general fund reserves, which have balances totaling $8 million as of June 30, 2016, are overfunded and potentially unnecessary.
Over the five-year period 2011-12 through 2015-16, the district’s reported unrestricted fund balance ranged from 12 to 17 percent of the ensuing year’s budget. Although the board appropriated fund balance annually to fund operations, it was not used because annual budgets resulted in operating surpluses. In addition, the district’s tax certiorari reserve was overfunded by $793,000 and the workers’ compensation reserve was not used to fund expenditures totaling approximately $1.5 million. When overfunded reserve amounts were added back into unrestricted fund balance, the recalculated unrestricted fund balance exceeded the statutory limit by 13.9 to 24.6 percentage points over the five-year period.
For access to state and local government spending and 50,000 state contracts, visit OpenBookNY. The easy-to-use website was created by Comptroller DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.