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State auditors rebuke school districts for large cash surpluses

Students listen to a lecture on May 1,

Students listen to a lecture on May 1, 2013. Photo Credit: Heather Walsh

State auditors have rebuked two more Long Island school districts for building up millions in excessive cash surpluses, bringing the total number of systems flagged for ballooning reserves since January to eight on the Island and at least 26 statewide.

The Northport-East Northport district overestimated expenses by a total of $33.9 million over a period of five years, thus amassing the large surpluses, said a new audit from state Comptroller Thomas DiNapoli's office.

"Unrealistic budget estimates can mislead district voters and taxpayers," the auditors stated.

In addition, a new audit found the Springs district expanded its unrestricted fund balance -- essentially a "rainy day" fund -- to $3.8 million over three years. The comptroller's office noted that the amount was nearly four times the legal limit for that type of fund, which is 4 percent of a district's budget.

Reports of growing cash surpluses are a sore point with many school officials on Long Island and elsewhere, who in recent years have insisted that state-imposed property tax caps are forcing them to cut staff and services and spend down reserves. Those officials also note that Albany has cut state aid to their districts twice in the past five years -- evidence, they say, that they must maintain financial cushions.

Districts must file corrective plans within 90 days of receiving a comptroller's audit. The state Education Department is responsible for seeing that districts carry out those plans.

Northport superintendent Marylou McDermott, in an unusually sharp response to the comptroller's office, objected to what she described as its suggestion that her district was engaged "in surreptitious or underhanded activity."

"The district aims to create stability and predictability for district taxpayers, and effectuates this goal through long-range fiscal planning, by 'conserving today, and protecting tomorrow,' " McDermott wrote.

She added that Moody's Investors Service, a bond-rating firm, had repeatedly commended Northport-East Northport for its use of funds and financial flexibility.

Elizabeth Mendelman, president of the Springs school board, did not comment on the auditors' conclusions but said the district agreed with their recommendations that it should adopt realistic estimates of expenditures and address the problem of excess fund reserves.

The other six Long Island districts where state auditors this year found large surpluses are: Central Islip, Floral Park-Bellerose, Mattituck-Cutchogue, Oysterponds, New Hyde Park-Garden City Park and North Bellmore.

Not all districts have managed to build cash cushions. The comptroller's office in recent months has identified at least five districts across the state, including Patchogue-Medford on the Island, that have shown declines in cash balances described as "dramatic" by the state.

However, the comptroller's auditors have identified far more districts as having excessive cash on hand.

Sharon Cates-Williams, a deputy state education commissioner, told members of the state Board of Regents last month that her staff intends to conduct a statewide probe of how districts handle reserve funds.

Local taxpayer advocates also have blasted districts for squirreling away what those activists regard as excessive cash reserves.

"It's fundamentally wrong," said Joseph Sabia, a former Northport school trustee who stepped down from that position in June. "You're taxing residents unnecessarily, and you're hurting people financially."

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