Audit: 2 LI BOCES have unreported reserve funds

An audit of six Boards of Cooperative Education Services statewide, including two on Long Island, found that they maintained $79 million in unauthorized or overfunded reserve funds and failed to inform participating school districts why the funds were needed or what they would be used for, according to the report released earlier this week by state Comptroller Thomas P. DiNapoli.

The six BOCES reviewed in the audit were Nassau, Western Suffolk, Rockland, Capital Region, Madison-Oneida and Erie 1.

Auditors found that Nassau BOCES retained $25.9 million in "inappropriately used reserved funds allocated from school district moneys." During the audit period from July 1, 2007, to June 30, 2009, auditors found that BOCES officials also "did not establish policies and procedures or develop specific documented plans for funding and use of the reserves." Auditors also looked at historical reserve data before 2007.

The report said that BOCES' intended use for $25.9 million in an employee benefits accrued liability reserve was to pay for retiree health insurance, which auditors said is an inappropriate use.

In a response, BOCES officials said the audit confirmed that there is no waste, fraud or abuse at Nassau BOCES. District Superintendent Tom Rogers said BOCES was aware of the concerns and changed its practices two years ago so that "we are not accumulating any more funds inappropriately."

Auditors found Western Suffolk BOCES retained $2.4 million in a specific reserve fund that it lacked specific legal authority to have and the funds were allocated from school district moneys. Auditors also said it failed to clearly report some reserves to its districts.

Western Suffolk BOCES officials said they plan to take appropriate steps to address the recommendations in the report and defended some of the points made by the comptroller regarding reserve funds and notifying its component school districts.