An audit of the Greenport Union Free School District’s financial condition indicates that over the past three fiscal years, the budget has “overestimated expenditures by approximately $3.3 million”, a report issued by the Office of New York State Comptroller Thomas P. DiNapoli’s division of local government and school accountability said this week.
The audit, which covered the time period from July 1, 2012 until March 31, 2014 found that “overestimated expenditures were primarily in the categories of teaching” with “regular” school at $777,640 and programs for children with handicapping conditions at approximately $1.5 million. Had district officials used more realistic budget estimates, they could have avoided the accumulation of excess fund balance; the district’s practice of finance operations, in effect, circumvented the statutory limitation of unexpended surplus fund balance to no more than four percent of the ensuing year’s appropriations,” the report stated.
According to the report, the objective of the audit was to examine the district’s financial condition and addressed the question of whether or not the Greenport board of education and district officials adopted “reasonable budgets and adequately manag the district’s financial condition.”
A letter in response to the study written by new Greenport Schools Superintendent David Gamberg said that a corrective action plan would commence; DiNapoli’s office said a written corrective action plan, or CAP, that addresses the findings and recommendations of the report must be prepared and provided within 90 days, with a copy forwarded to the Commissioner of Education, and implementation of the CAP to begin by the end of the next fiscal year.
According to the report, the school board and superintendent are responsible for adopting budgets that “contain estimates of actual and necessary expenditures that are funded by realistic revenues. Sound budgeting provides sufficient funding for necessary operations. Prudent fiscal management includes establishing reserves needed to address long-term obligations or planned future expenditures. Once the board has addressed those issues, any remaining fund balance, exclusive of the amount allowed by law to be retained to address cash flow and unexpected occurrences, should be used to reduce the local tax levy.”
The report also states that “accurate historic and current information should be used to ensure that budgeted appropriations are not overestimated and that fund balance assigned as a funding source is actually used in the next fiscal year to cover expenditures. Similarly, revenue estimates should be based on known sources of revenue reflective of any identified trends. Unreasonable budgetary practices or lack of information about actual budget performance can mislead cistrict taxpayers and can significantly impact the district’s year-end unexpended surplus fundsand financial condition.”
In addition, the report states that both the BOE and district officials need to improve oversight over the district’s budget process and financial condition.
District officials, the report states, “adopted budgets that included plans to use fund balance totaling $1.4 million between 2008-09 and 2012-13.”
The district used $612,400 of that amount in the 2008-09 and 2009-10 fiscal years while “incurring planned operating deficits in trying to avoid increasing its tax levy and the taxpayers’ burden during the economic downturn. During these two years, the district depleted its unexpended surplus funds to one percent of the subsequent year’s budget, and it also used more than $500,000 from its reserve funds. However, the district incurred operating surpluses from 2010-11 through 2012-13 that resulted in it not using the remaining $787,600 of appropriated fund balance.”
The reported stated that in 2010-2011, the district “gradually increased its tax levy and budget. In each of the three years from 2010-11 to 2012-13, the district incurred operating surpluses and grew its fund balance from 1.1 percent in 2010-11 to 5.6 percent in 2012-13. The district’s external auditor informed officials that they exceeded the statutory limit of four percent in 2012-13, despite transferring more than $350,000 to reserve funds. When considering unused appropriated fund balance the actual unexpended surplus fund balance was 5.7 percent in 2011-12 and 7.5 percent in 2012-13.”
The audit listed recommendations, including that the BOE should develop and adopt budgets that include “realistic estimates for revenues and expenditures based on all information available at that time, including historical data.”
The board should not adopt budgets that result in the appropriation of unexpended surplus funds that will not be used, the audit stated; district officials should also ensure that unexpended surplus fund balance is in compliance with the Real Property Tax Law statutory
limits, the report also recommended.
Finally, the audit suggested that the district develop a plan to reduce the unexpended surplus fund balance “in a manner that benefits district taxpayers. Such uses could include, but are not limited to, increasing necessary reserves, paying off debt, financing one-time expenditures and reducing property taxes.”
Gamberg’s response also stated that officials agreed the district should develop and adopt budgets that include “‘realistic estimates for revenues and expenditures based on all information available at that time, including historical data’ . . . and, in fact, feel that has been the practice of the board in the past and will continue to be in the future. The district is committed to efficient management of operations, maintaining and improving our educational program, and providing accountability for tax dollars spent.”
The superintendent, who recently took the helm in Greenport after former Superintendent Michael Comanda retired, also said the board supports the use of unexpended fund balance to increase necessary reserves and to keep property tax increases to below the property tax cap levels.
Gamberg also said it was the Greenport district’s suggestion to extend the scope of the audit to include the four years back to 2008-9 and “present a clearer picture of the district’s depletion of reserves and fund balance to historically low levels in time of economic downturn, and the subsequently successful, multi-year plan to re-attain healthy reserve balances. We believe this reflects the long-term financial strategic plan of the district. The district will ensure that the unassigned fund balance remains in compliance with the Real Property Tax Law statutory limits.”
