View
0
Download
0
Category
Preview:
Citation preview
Division of LocaL Government & schooL accountabiLity
o f f i c e o f t h e n e w y o r k s t a t e c o m p t r o L L e r
report of ExaminationPeriod Covered:
July 1, 2012 — October 2, 2013
2014M-97
Monticello Central School District
Budgeting
thomas p. Dinapoli
11Division of LocaL Government anD schooL accountabiLity
Page
AUTHORITY LETTER 2
INTRODUCTION 3 Background 3 Objective 3 Scope and Methodology 3 CommentsofDistrictOfficialsandCorrectiveAction 3
BUDGETING 5 Recommendations 8
APPENDIX A Relevant Demographics 9 APPENDIX B ResponseFromDistrictOfficials 10APPENDIX C OSC Comments on the District’s Response 13APPENDIX D AuditMethodologyandStandards 14APPENDIX E HowtoObtainAdditionalCopiesoftheReport 15APPENDIX F LocalRegionalOfficeListing 16
Table of Contents
2 Office Of the New YOrk State cOmptrOller2
State of New YorkOffice of the State Comptroller
Division of Local Governmentand School Accountability September2014
DearSchoolDistrictOfficials:
AtoppriorityoftheOfficeoftheStateComptrolleristohelpschooldistrictofficialsmanagetheirdistrictsefficientlyandeffectivelyand,bysodoing,provideaccountabilityfor taxdollarsspent tosupportdistrictoperations.TheComptrolleroverseesthefiscalaffairsofdistrictsstatewide,aswellascompliancewithrelevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversightisaccomplished,inpart,throughouraudits,whichidentifyopportunitiesforimprovingoperationsandBoardofEducationgovernance.Auditsalsocanidentifystrategiestoreducecostsandtostrengthencontrols intended to safeguard district assets.
Following is a report of our audit of theMonticello Central School District, entitled Budgeting.This auditwas conducted pursuant toArticleV, Section 1 of theStateConstitution and theStateComptroller’sauthorityassetforthinArticle3oftheGeneralMunicipalLaw.
This audit’s results and recommendations are resources for district officials to use in effectivelymanagingoperationsandinmeetingtheexpectationsoftheirconstituents.Ifyouhavequestionsaboutthisreport,pleasefeelfreetocontactthelocalregionalofficeforyourcounty,aslistedattheendofthis report.
Respectfullysubmitted,
Office of the State ComptrollerDivision of Local Governmentand School Accountability
State of New YorkOffice of the State Comptroller
33Division of LocaL Government anD schooL accountabiLity
Background
Introduction
Objective
Scope andMethodology
Comments ofDistrict Officials andCorrective Action
The Monticello Central School District (District) is located in the Towns of Bethel, Fallsburgh, Forestburgh, Mamakating andThompson in Sullivan County. The District is governed by the Board of Education (Board) which comprises nine elected members. The Board is responsible for the general management and control of the District’sfinancial and educational affairs and adopting the annualbudget, which is prepared by various District officials, includingthe District BusinessAdministrator (BusinessAdministrator). TheSuperintendent of Schools (Superintendent) is the chief executiveofficeroftheDistrictandisresponsible,alongwithotheradministrativestaff,fortheday-to-daymanagementoftheDistrictunderthedirectionof the Board. The current Superintendent started with the District in August2011,andthecurrentBusinessAdministratorstartedwiththeDistrictinSeptember2011.
The District’s general fund budgeted appropriations for the 2013-14 school year totaled $80,186,419, which were funded primarilywith real property taxes and State aid. The District operates fiveschools,withapproximately3,100studentsand600employees.TheDistrict’s employees are represented under nine collective bargaining agreements.TwoagreementsexpiredasofJune30,2011andremainedunsettleduntilJuly2012andNovember2013,respectively.
The objective of our audit was to review the District’s financialcondition.Ourauditaddressedthefollowingrelatedquestion:
• DidtheBoardandDistrictofficialsadoptreasonablebudgets?
WeexaminedthefinancialconditionoftheDistrictfortheperiodJuly1,2012throughOctober2,2013.ToanalyzetheDistrict’shistoricalfinancialconditionandreserves,weextendedourauditscopeperiodbacktoJuly1,2009andprojectedforwardthroughJune30,2014.
We conducted our audit in accordance with generally accepted government auditing standards (GAGAS). More information onsuch standards and the methodology used in performing this audit is includedinAppendixDofthisreport.
The results of our audit and recommendations have been discussed withDistrictofficialsandtheircomments,whichappearinAppendixB, have been considered in preparing this report. Except asspecifiedinAppendixB,Districtofficialsgenerallyagreedwithourrecommendations and indicated that they plan to initiate corrective
4 Office Of the New YOrk State cOmptrOller4
action.AppendixCincludesourcommentsontheissuesraisedintheDistrict’s response letter.
The Board has the responsibility to initiate corrective action. Pursuant toSection35of theGeneralMunicipalLaw,Section2116-a(3)(c)oftheEducationLawandSection170.12oftheRegulationsoftheCommissionerofEducation,awrittencorrectiveactionplan(CAP)that addresses the findings and recommendations in this reportmustbepreparedandforwardedtoourofficewithin90days,withacopyforwardedtotheCommissionerofEducation.Totheextentpracticable, implementation of theCAPmust begin by the end ofthe next fiscal year. Formore information on preparing and filingyourCAP,pleaserefertoourbrochure,Responding to an OSC Audit Report,whichyou receivedwith thedraft audit report.TheBoardshould make the CAP available for public review in the DistrictClerk’soffice.
55Division of LocaL Government anD schooL accountabiLity
Budgeting
TheBoardandDistrictofficialsareresponsibleforadoptingbudgetsthat contain realistic estimates of expenditures and the resourcesavailable to fund them and for ensuring that fund balance does not exceedtheamountallowedbylaw.Estimatesofexpenditures(i.e.,appropriations) should be based on known needs as well as historical trends. Similarly, revenue estimates should be based on knownsources of revenue reflective of any identified trends.The surplusaccumulated over time by District operations (i.e., unexpendedsurplus fund balance1) duetorevenuesexceedingexpendituresisnotallowed to exceed 4 percent of the ensuing year’s appropriations,whichisthelegallimitestablishedbyNewYorkStateRealPropertyTaxLaw.Excessunexpendedsurplusfundbalancemaybeusedtoreducetaxleviesorestablishvariouslegalreservestofinancecertainfutureexpenditures(asdefinedbyeachreserve).TheBoardshouldestablishpoliciesrelatingtoreserves,definingwhichreserveswouldbe established along with the reasonable funding amounts.
TheBoardandDistrictofficialscouldhaveadoptedmorereasonablebudgets.Thebudget estimates for revenues and expenditures havenot been aligned with historical or actual needs of the District. This resultedinputtinganunnecessaryburdenontaxpayers.From2009-10to2012-13,theDistrictspentanaverageof$6millionlessthanbudgetedandreceived$2.3millionmoreinrevenuethanbudgeted.
Table 1: Budget Variances2009-10 2010-11 2011-12 2012-13a Average
Revenue Variance (Budget vs. Actual) $1,602,386 $2,140,887 $2,523,544 $2,919,864 $2,296,670
Expenditure Variance (Budget vs. Actual) $7,550,837 $7,197,087 $5,935,161 $3,284,899 $5,991,996
Total Variance $9,153,223 $9,337,974 $8,458,705 $6,204,763 $8,288,666 aThefirstbudgetpreparedbythecurrentSuperintendentandBusinessAdministratorwasforfiscalyear2012-13.
____________________1 The Governmental Accounting Standards Board (GASB) issued Statement54,whichreplacesthefundbalanceclassificationsofreservedandunreservedwithnewclassifications:nonspendable,restrictedandunrestricted(comprisingcommitted, assigned and unassigned funds). The requirements of Statement54 are effective for fiscal years ending June 30, 2011 and beyond. To easecomparabilitybetweenfiscalyearsendingbeforeandaftertheimplementationofStatement54,wewilluse the term“unexpendedsurplusfunds” torefer tothatportionof fundbalance thatwasclassifiedasunreserved,unappropriated(priortoStatement54)andisnowclassifiedasunrestricted,minusappropriatedfundbalance, amounts reserved for insurance recovery and tax reduction andencumbrancesincludedincommittedandassignedfundbalance(post-Statement54).
6 Office Of the New YOrk State cOmptrOller6
These revenue variances were primarily caused by consistently underestimatingBOCESrefunds(averageof$1.7millionvariance).Theexpenditurevarianceswerecausedbyoverestimatingexpendituresrelatedtoteaching-regularschool(averageof$1.4millionvariance),program for students with disabilities services (average of $1.4million variance), transportation services (average of $584,000variance)andplantoperation(averageof$497,000variance).
WhileDistrictofficialsplannedforoperatingdeficitsfrom2009-10through2012-13averaging$6.4million,tobefundedbyunexpendedsurplusfunds,thebudgetshaveprovidedsurpluses.Therefore,thesefundswerenotneeded.AlthoughDistrictofficialshavetakenstepsandhavelessenedoperatingsurplusesfrom$3.4millionin2009-10tolessthan$615,000in2012-13,unexpendedsurplusfundbalancehas continued to grow.
2009-10 2010-11 2011-12 2012-13Planned Results of Operations -
Surplus/(Deficit) $(5,757,225) $(7,030,000) $(7,052,000) $(5,590,000)
Actual Results of Operations -Surplus/(Deficit) $3,395,898 $2,307,481 $1,406,486 $614,763
$(8)
$(6)
$(4)
$(2)
$-
$2
$4
Mill
ions
Table 2: Results of Operations - Planned vs. Actual
The2013-14budgethadaplannedoperatingdeficitof$5.5million,but the District will end the year with a projected operating surplus of$2.5million,furtherincreasingthesurplus.Currently,therearenoBoard policies relating to reserves and reasonable balances.
ThoughDistrictofficialsreviewedandadjustedthefundinglevelsofsomeoftheDistrict’sreserves,othersremainedfundedatlevelsthatwerehigherthannecessary.Theadoptedbudgetssincethe2009-10fiscal year included appropriations relating to the purposes of twoofthosereserves:workers’compensationclaimsandunemploymentinsurance. For example, as of June 30, 2013, the workers’compensationreservehadabalanceofapproximately$2.6million,whichwouldbe enough to fund threeyears of expendituresbasedontheDistrict’sfour-yearaverageannualexpenditures.Inaddition,theunemploymentinsurancereservehadabalanceofapproximately$1.1millionasof June30,2013,whichwouldbe enough to fundsevenyearsofexpendituresbasedontheDistrict’sfour-yearaverageannualexpenditures.
77Division of LocaL Government anD schooL accountabiLity
Our analysis comparing historical actual expenditures to adoptedbudgetsidentifiedthatpreviousbudgetswerenotpreparedbasedonprioryears’actualresults.Moreover,whilethebudgetforfiscalyear2012-13wasthefirstbudgetpreparedbythecurrentSuperintendentand BusinessAdministrator and budgeted amounts were closer toactualresults thaninprioryears, thebudgetedamountsstillvariedfromactualamountsbymorethan$6.2million.TheSuperintendentand Business Administrator stated that, while they identified thesignificance of the accumulated unexpended surplus fund balance,they intended to decrease the balance through gradual changes in ordertoavoidanynegativeeffectscausedbyover-adjustingbudgetedamounts,includingfuturerestrictionsrelatingtothetaxcap.2ABoardmember told us the Board was conservative in budgeting because of the perceived likelihood of a new local casino. She stated the Board anticipated future costs due to increased enrollment. Furthermore,accordingtotheBusinessAdministrator,theworkers’compensationreserve is being maintained in case there is a substantial employee injuryastheDistrict’sworkers’compensationexpendituresaredirectpaymentofclaimsfromtheresultofwork-relatedinjuries.However,she did state that she has not yet had the opportunity to review the funding of the unemployment insurance reserve.
As a result of poor budgeting practices, unexpended surplus fundbalance as a percentage of the ensuing year’s budgeted appropriations hasgrownfrom8.4percentasofJune30,2010to17.6percentasofJune30,2013andislikelytocontinuetorise.Addingtheoverfundedamount of the reserve balances would further increase this percentage. Furthermore,duetoanotherunexpectedoperatingsurplusin2013-14,thispercentagewilllikelybeevengreater,andthe$5.5millionof appropriated fund balance in the 2013-14 budgetwould not beneeded.Ifthisappropriatedfundbalancehadbeenincludedintheunexpended surplus fund balance, the percentage would be 24.5percent. District officials indicated they plan to create additionalreserve funds, such as a capital reserve and an equipment reserve,whichwilldecreasetheamountofunexpendedsurplusfundbalance.
WeconcludethattheincreasesintheDistrict’srealpropertytaxlevybetweenthefiscalyearsended2010through2013wereunnecessary.
____________________2 In 2011, the State Legislature enacted a law establishing a property tax levylimit,generally referred toas theproperty taxcap.Under this legislation, thepropertytaxleviedannuallygenerallycannotincreasemorethan2percent,ortherateofinflation,whicheverislower,withsomeexceptions.Schooldistrictsmayoverridethetaxlevylimitbypresentingthevotersabudgetthatrequiresataxlevythatexceedsthestatutorylimit.However,thatbudgetmustbeapprovedby60percentofthevotescast.
8 Office Of the New YOrk State cOmptrOller8
Recommendations
Table 3: Change in Real Property Tax Levy vs. Surplus Results of Operations2010 2011 2012 2013 Total
Change in Tax Levy (including STAR) $1,007,043 $705,747 $2,612,323 $859,349 $5,184,462
Results of operations $3,395,898 $2,307,481 $1,406,486 $614,763 $7,724,628
The aggregate operational surpluses were more than $2.5 millionovertheincreasesintherealpropertytaxleviesforthesameyears.Ifrealpropertytaxeswerereducedbyjust80percentoftheamountofappropriatedfundbalance,anaveragetaxpayerintheDistrictwouldhavesaved$558ontheirrealpropertytaxbill,assumingahomewithanassessedvalueof$179,000.3Theseunnecessaryrealpropertytaxlevies are particularly disconcerting given the District’s demographic profile,where30.5percentof children in theDistrict are living inpovertyascomparedtothestatewideaverageof21.3percent.4
1. The Board and District officials should develop realisticbudgets that are consistent with the District’s actual revenues andexpenditurestoavoidraisingmorerealpropertytaxesthannecessary.
2. The Board should ensure that the amount of the District’s unexpended surplus fund balance is in compliance with RealProperty Tax Law statutory limits and reduce the amount ofunexpended surplus fund balance in a manner that benefitsDistrict taxpayers.Suchusescould include,butarenot limitedto,usingsurplus fundsasafinancingsource, fundingone-timeexpendituresorfundingappropriatereserves.
3. TheBoardshouldreviewallreservebalancesandtransferexcessfundstounrestrictedfundbalance,whereallowedbylaw,orotherreserves established and maintained in compliance with statutory directives.Also, theBoard should establishpolicies relating toreserves, defining which reserves would be established alongwith the reasonable funding amounts.
____________________3 Inordertodistributeschooldistricttaxesamongmultiplemunicipalities,thelevelofassessmentofeachmunicipalitymustbeequalizedtofullmarketvalue.Thisvaluereportedwouldbethefullassessedvalueafteradjustingforequalizationratesinthedifferenttownsandvillages.Therefore,actualsavingswouldvarydependingonwhichtownthetaxpayerlivedin.
4 United States Census Bureau 2012 small area income and poverty estimates(SAIPE) Program – www.census.gov. For additional demographics relating to SullivanCounty,seeAppendixA.
99Division of LocaL Government anD schooL accountabiLity
APPENDIX A
RELEVANT DEMOGRAPHICS
The following data has been included in this report to further detail the demographic and economic profileoftheDistrictandsurroundingarealocatedinSullivanCounty.5
• Thetotalrateofpersonsbelowthepovertylevelwas17.2percent,comparedto14.9percentforNewYorkState.
• 11.7percentofhouseholdsreceivedSupplementalNutritionAssistanceProgram/foodstampbenefitswithintheprior12months,comparedto13.5percentforNewYorkState.However,other indicators indicate a higher poverty level in the County than the rest of the State.
• Themedianhouseholdincome(from2008-2012)was$48,050,comparedto$57,683forNewYorkState.
• 51.7percentofhouseholdsearnlessthan$50,000ofannualincome,comparedto44percentforNewYorkState.
• The homeownership ratewas 66.5 percent, compared to 54.5 percent forNewYorkState.However,themedianvalueislower.
• Themedianvalueofowner-occupiedhousingunitswas$179,500,comparedto$295,300forNewYorkState.
____________________5 Sullivan County demographic information as per United States Census Bureau located at www.census.gov
10 Office Of the New YOrk State cOmptrOller10
APPENDIX B
RESPONSE FROM DISTRICT OFFICIALS
TheDistrictofficials’responsetothisauditcanbefoundonthefollowingpages.
1111Division of LocaL Government anD schooL accountabiLity
See Note1 Page13
SeeNote4 Page13
SeeNote2 Page13
SeeNote3 Page13
SeeNote 2Patge13
12 Office Of the New YOrk State cOmptrOller12
See Note3Page13
1313Division of LocaL Government anD schooL accountabiLity
APPENDIX C
OSC COMMENTS ON THE DISTRICT’S RESPONSE
Note1
Asstatedinthereport,toanalyzetheDistrict’shistoricalfinancialconditionandreserves,weextendedourauditscopeperiodbacktoJuly1,2009andforwardthroughJune30,2014.
Note2
Ourauditreviewedfivefiscalyearsfrom2009-10through2013-14,andthefirstbudgetpreparedbythecurrentSuperintendentandBusinessAdministratorwasforfiscalyear2012-13.
Note3
From2009-10to2012-13,theDistrictspentanaverageof$6millionlessthanbudgetedandreceived$2.3millionmoreinrevenuethanbudgeted.Additionally,the2013-14budgethadaplannedoperatingdeficitof$5.5million,buttheDistrictendedtheyearwithanoperatingsurplusof$2.5million.Thesesignificantlylargebudgetingvariancesandresultingoperatingsurplusesdonotdemonstrateapatternof realistic budgeting practices.
Note4
Considering that the District did not need to use any appropriated fund balance during any of our scopeperiod,morerealisticbudgetestimatesmayhaveenabledabetteruseoffundbalancetofundoperationsinsteadofincreasingrealpropertytaxeseveryyear.
14 Office Of the New YOrk State cOmptrOller14
APPENDIX D
AUDIT METHODOLOGY AND STANDARDS
Toaccomplishourauditobjective,weinterviewedappropriateDistrictofficialsandemployees,testedselectedrecordsandexaminedpertinentdocumentsfortheperiodJuly1,2012throughOctober2,2013.ToanalyzetheDistrict’shistoricalfinancialconditionandreserves,weextendedourauditscopeperiodbacktoJuly1,2009andprojectedforwardthroughJune30,2014.Ourexaminationincludedthefollowing:
• Weidentifiedanddocumentedrelevantbackgroundanddemographicinformationrelatedtothe District and Sullivan County.
• WereviewedandassessedtheeffectivenessoftheDistrict’sbudgetdevelopmentprocessfrom2009-10through2012-13.
• We compared budgeted revenues and expenditures to actual results from 2009-10 through2012-13.
• WeusedtheDistrict’s2013-14fundbalanceprojectionreporttodeterminetheprojectedresultsofoperationsfortheyearinordertoquantifytheexpectedoperatingsurplusordeficitasofJune30,2014.
• WecalculatedtheDistrict’sresultsofoperationsfrom2009-10through2012-13andidentifiedall relevant trends.
• Wedocumentedthereportedunexpendedsurplusfundbalancesfrom2009-10through2012-13andcalculatedthosebalancesasapercentageoftheensuingyears’appropriations.
• Weassessed theappropriationanduseofunexpendedsurplus funds from2009-10 through2012-13.
• WedeterminedandassessedthereasonablenessoffundinglevelsoftheDistrict’sreservesasofJune30,2013.
• WeidentifiedtrendsintheDistrict’srealpropertytaxleviesfrom2009-10through2012-13andcalculatedthepotentialeffectofusingunexpendedsurplusfundstolowertaxlevyamounts.
WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtainsufficient,appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.
1515Division of LocaL Government anD schooL accountabiLity
APPENDIX E
HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT
OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/
Toobtaincopiesofthisreport,writeorvisitourwebpage:
16 Office Of the New YOrk State cOmptrOller16
APPENDIX FOFFICE OF THE STATE COMPTROLLER
DIVISION OF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITYAndrewA.SanFilippo,ExecutiveDeputyComptroller
GabrielF.Deyo,DeputyComptrollerNathaalieN.Carey,AssistantComptroller
LOCAL REGIONAL OFFICE LISTING
BINGHAMTON REGIONAL OFFICEH.ToddEames,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding-Suite170244HawleyStreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313Email:Muni-Binghamton@osc.state.ny.us
Serving:Broome,Chenango,Cortland,Delaware,Otsego,Schoharie,Sullivan,Tioga,TompkinsCounties
BUFFALO REGIONAL OFFICEJeffreyD.Mazula,ChiefExaminerOfficeoftheStateComptroller295MainStreet,Suite1032Buffalo,NewYork14203-2510(716)847-3647Fax(716)847-3643Email:Muni-Buffalo@osc.state.ny.us
Serving:Allegany,Cattaraugus,Chautauqua,Erie,Genesee,Niagara,Orleans,WyomingCounties
GLENS FALLS REGIONAL OFFICEJeffreyP.Leonard,ChiefExaminerOfficeoftheStateComptrollerOneBroadStreetPlazaGlensFalls,NewYork12801-4396(518)793-0057Fax(518)793-5797Email:Muni-GlensFalls@osc.state.ny.us
Serving:Albany,Clinton,Essex,Franklin,Fulton,Hamilton,Montgomery,Rensselaer,Saratoga,Schenectady,Warren,WashingtonCounties
HAUPPAUGE REGIONAL OFFICEIraMcCracken,ChiefExaminerOfficeoftheStateComptrollerNYSOfficeBuilding,Room3A10250VeteransMemorialHighwayHauppauge,NewYork11788-5533(631)952-6534Fax(631)952-6530Email:Muni-Hauppauge@osc.state.ny.us
Serving:NassauandSuffolkCounties
NEWBURGH REGIONAL OFFICETennehBlamah,ChiefExaminerOfficeoftheStateComptroller33AirportCenterDrive,Suite103NewWindsor,NewYork12553-4725(845)567-0858Fax(845)567-0080Email:Muni-Newburgh@osc.state.ny.us
Serving:Columbia,Dutchess,Greene,Orange,Putnam,Rockland,Ulster,WestchesterCounties
ROCHESTER REGIONAL OFFICEEdwardV.Grant,Jr.,ChiefExaminerOfficeoftheStateComptrollerThe Powers Building16WestMainStreet–Suite522Rochester,NewYork14614-1608(585)454-2460Fax(585)454-3545Email:Muni-Rochester@osc.state.ny.us
Serving:Cayuga,Chemung,Livingston,Monroe,Ontario,Schuyler,Seneca,Steuben,Wayne,YatesCounties
SYRACUSE REGIONAL OFFICERebeccaWilcox,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Room409333 E. Washington StreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:Muni-Syracuse@osc.state.ny.us
Serving:Herkimer,Jefferson,Lewis,Madison,Oneida,Onondaga,Oswego,St.LawrenceCounties
STATEWIDE AUDITSAnnC.Singer,ChiefExaminerStateOfficeBuilding-Suite170244HawleyStreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313
Recommended