A state audit of the Jericho school district found that officials overestimated budgeted appropriations by 9 percent to 12 percent and overfunded its retirement contribution reserve, according to a report from the state comptroller.
Auditors also found the district budgeted and paid for debt service from the general fund despite maintaining an average debt-service balance of more than $1 million, according to the audit released last week by state Comptroller Thomas DiNapoli.
“Actual revenues were generally consistent with budgeted estimates,” the report read. “However, the board and district officials annually overestimated appropriations even though they indicated that they used historical or known trends in budget development.”
Jericho school officials, in their written response to auditors, countered that while they agree with the premise of adopting budgets more closely aligned with historical expenditures, “there are areas where we find it advantageous to consider other data and outside information that might impact costs.”
Jericho Superintendent Henry L. Grishman said Tuesday that the district has instituted some of the comptroller’s recommendations, however, “one of the things we are most proud of is that in the last four years we have had three zero tax-levy increases.
“We have tightened expenditures and we do feel that within the fund balance — I believe that we have met all legal requirements.”
According to the audit, the board and district officials overestimated budgeted appropriations by 9 percent to 12 percent — ranging from $9.8 million to $12.4 million — for three of the four years in the audit period, from 2012-13 through 2014-15. The audit examined the district’s finances from July 1, 2014, to May 24, 2016, but also expanded the scope to prior years to analyze financial trends.
Auditors found that the district appropriated $14.9 million in fund balance during that time that was not needed because the district generated $22 million in operating surpluses during three years, from 2012-13 to 2014-15.
District officials, however, properly reduced the 2014-15 unrestricted fund balance by transferring money into a capital project the next year. In addition, the district has not increased the tax levy in the past three years, the report read.
In its written response to the audit, the district said it “regularly reviews each appropriation budget line and focuses our efforts to adopt realistic estimates for expenditures.” And while the district, which touts a comprehensive, high-quality education, appreciated the review, it “submits that our current budgeting practices and fund balance/reserves management are conducted in furtherance of this objective,” the response read.
Under state law, districts are legally limited to unrestricted fund balances, also known as “rainy day” funds, of no more than 4 percent of annual budgets. Since January 2014, DiNapoli has issued more than 20 audits of Long Island school districts that are critical of excess reserves, saying that any savings should be passed onto taxpayers.
The charge of excess budgeting rankles many school administrators in Nassau and Suffolk counties, who say they must maintain financial cushions to preserve student programs and small class sizes in an era of fiscal uncertainty.
Grishman noted that the district’s budgeting process has enabled it to meet emergency expenditures that have arisen, including repairs to the pool at the high school and two boilers at the elementary schools.
The district maintains four reserve funds, including a retirement contribution reserve that has a balance of $16.9 million. Auditors noted that the average annual payment to the state retirement system was about $2.4 million over the past four years.
The comptroller’s office made several recommendations, including adopting budgets that realistically reflect the district’s operating needs based on historical expenditure trends or other identified analysis. They also advised that the district should discontinue appropriating a fund balance that is not needed or used to fund district operations.
The district should use surplus funds as a financing source to benefit residents, such as for funding onetime expenditures and reducing property taxes, the audit said.
In addition, the district should review its reserve fund policy and ensure that the funding levels for the retirement contribution reserve are reasonable, it said.
DiNapoli’s office also released a report on the East Hampton school district, finding that the board has not annually designated a system administrator. Instead, the board annually appoints a network systems manager to perform those duties.
District officials have not adopted procedures outlining how user access rights should be established or modified, and permissions are not reviewed quarterly to ensure a proper segregation of duties, the report found.
Users were given system administrator rights when they shouldn’t have been, giving them access to leave records, vendor information, budget transfers and personal, private and sensitive information.
East Hampton officials said in their written response that they already have implemented several steps based on the comptroller’s recommendations, including amending the computer control policy.