Baldwinsville Central School District overestimated expenses by $11.3 million and used the surplus to overfund reserve accounts by more than $7.7 million, according to an audit released last week by State Comptroller Thomas DiNapoli. Officials said the surplus could have been used to significantly reduce the district’s property tax rate.
“Setting money aside for a rainy day is a good idea, but reserves have to be funded the right way,” DiNapoli said. “All across New York, families are struggling to make ends meet. Now is not the time to be over-taxing homeowners. The Baldwinsville Central School District needs to more accurately estimate its expenses, stop overfunding reserves and use the money to reduce the tax levy or pay for one-time expenses.”
The audit, which looked at the district’s finances for the 2006-07 and 2007-08 fiscal years, found the district did not make sure its budget estimates were reasonable and did not maintain reserves in accordance with state law. By underestimating revenues and overestimating expenses, reserve funds increased to more than $16 million.
District officials defended their actions claiming calculations have benefited taxpayers.
“The comptroller implies unfairly that the district has not been ‘realistic’ in its budget assumptions adding to the burden on taxpayers,” said Kelly Cary, the Baldwinsville Central School District’s public information officer. “This prudent approach has protected the district’s instructional programs and taxpayers. The fact that our tax levy for 2009-10 is the same as the prior year demonstrates the district’s fiscal responsibility. Our tax rate per thousand for 2009-10 is $22.83; five years ago it was $24.20.”
Cary added the district also takes exception to the comptroller’s opinion regarding the methodology used in the development and calculation of its various reserves. One example is the limited view taken by the Comptroller regarding the district’s funding of the Tax Certiorari reserve.
“The district knew in June 2009 that Anheuser Busch would file a large tax certiorari in July 2009. Anheuser Busch filed a tax certiorari worth $1.5 million on July 27, 2009. In anticipation of this, the district added to the reserve for Tax Certiorari in June. It should be pointed out our external auditor did not take exception to this action. According to the comptroller, adding to this reserve should have occurred in 2009-10. In his opinion, the district added money to this reserve too soon,” Cary said.
State auditors also discovered the district allowed a former interim superintendent to defer salary payments so she could collect her full pension while still working full-time for the district in the 2002-03 school year. Since that time, the former interim superintendent has received salary payments of $87,690.
“In 2002, an interim superintendent was hired while the district searched for a permanent replacement. The district and the individual reached an agreement that was prepared and approved by the district’s attorney regarding the interim superintendent’s compensation,” Cary said. “Unfortunately, a dispute has since developed over some of the terms in this agreement between the interim superintendent and the Teacher Retirement System. The individual involved reached a settlement of the issue with the Teacher Retirement System in 2009. Although the district acted upon the advice of counsel, the comptroller chose to criticize the district for its actions. While the district feels this criticism is unfair, it will work to ensure that any such future agreements are properly designed so as not to violate laws and regulations that govern payroll transactions.”
Cary noted that the audit did not find any fault with the district’s accounts payable practices, the treasurer’s handling of cash receipts, receivables or disbursements, purchasing, claims auditing, accounting, investments or payroll.
“This reflects the district’s commitment to establishing and maintaining internal controls,” she said. “District residents can be assured that their monies have been safeguarded and used as intended.”
Cary said the district faces numerous financial obstacles in the coming years including mid-year cuts to state aid, increases in expenses such as retirement and health insurance and significant declines in revenue.
“To keep the tax rate down for 2010-11, the district will need to use its reserves, just as a homeowner would need to use a savings account to pay for unforeseen expenses,” Cary said. “In light of New York State’s economic uncertainty and how it is affecting state aid to school districts, the district reserves benefit taxpayers and protect them from significant increases in tax rates at a time when they can least afford it.”
“Our past budgets have prepared the district and the Baldwinsville community for future economic challenges and hard times by setting aside reasonable and prudent reserves to help mitigate these future financial challenges while maintaining student instruction and programs,” Cary said. “Those future economic challenges, those hard times that the district prepared for with our past budgets, are here now, and the Baldwinsville community will benefit from the district’s foresight.”
Recommendations made to the district by DiNapoli’s office include:
preparing budgets that realistically estimate the revenues and appropriations needed to finance district operations;
include an accurate budget provision for the amount the board intends to transfer to reserves and other funds;
properly accounting for and reporting post-retirement health insurance costs and the moneys held by the district to fund the costs;
reviewing all reserves currently established and determine if the balances are necessary, reasonable and in compliance with statutory requirements;
use the surplus fund balance to benefit district taxpayers including increasing necessary reserves, paying off debt, financing one-time expense or reducing district property taxes; and
reviewing the employment status of any retirees paid by the district and verify they are properly reported to the retirement systems.
District officials plan to submit a corrective action plan to the comptroller’s office to address the findings identified in the report. To review the audit, visit osc.state.ny.us/localgov/audits/schools/2009/baldwinsville.pdf. In order to improve accountability of the state’s schools, DiNapoli’s office will audit all of New York’s school districts and Boards of Cooperative Educational Services by 2010.
