The Locust Valley Water District's budgeting practices created the false impression of surpluses, according to an audit from the state comptroller's office.
District officials agreed in a letter with the findings and said they would implement recommended changes. The district supplies water to 7,500 people in Locust Valley, Lattingtown and parts of Mill Neck and Matinecock, according to its website.
"This type of budgeting creates an illusion that you're holding down property taxes or avoiding water rate hikes by using up reserve funds," Brian Butry, spokesman for Comptroller Thomas DiNapoli, said last week. "In essence, the district wasn't using the reserve funds as it had stated and has a fund balance they may or may not need because of the inflated expenditures."
From 2009 through 2012, the district's budgets called for using more than $1 million of fund balance -- surplus money left over from the previous year's budget -- to pay for ongoing operations. The district tapped its fund balance in three of those years, but the greatest amount was $305,635 and the average amount of fund balance it needed during those years was $50,573, the report said.
The report also found that the district was consistently budgeting more funds on capital spending than actually used.
Butry said the practice was "misleading to taxpayers."
The comptroller's office recommended that the district adopt budgets that realistically reflect its operating and capital needs and how much financial resources are actually available.
District superintendent Charles Savinetti Jr. said the board's budgeting practices have been in place for many years and were intended to be conservative and keep a low debt burden.