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Long IslandEducation

Tiny East End school district takes heat for huge cash reserve

The Sagaponack system built a "rainy day" fund of more than $1 million, equivalent to 61 percent of its annual budget and far beyond the state's legal limit, a state audit report shows.

The Sagaponack school district's one-room schoolhouse, on Main

The Sagaponack school district's one-room schoolhouse, on Main Street in the village, on Dec. 2, 2015. Photo Credit: Doug Kuntz

ALBANY — The tiny Sagaponack school district on the East End has stockpiled a king-sized cash reserve of more than $1 million — equivalent to 61 percent of its annual budget, state monitors reported.

The state comptroller’s office, in a sharply worded audit report, noted that the law restricts the "rainy-day" reserve to 4 percent of a district's operating budget and that Sagaponack has been scolded once before for holding excessive cash.

This type of reserve, known formally as unrestricted funds, may be spent at the discretion of local school administrations rather than being earmarked for specific purposes. Sagaponack’s 61 percent figure is by far the highest reported by the state, proportionally speaking, among the 124 school districts in Nassau and Suffolk counties.

School systems regularly step over the 4 percent line. Sagaponack is the 30th district on Long Island cited by the state for such violations since January 2014.

“Any unrestricted fund balance over this percentage must be used to reduce the real property tax levy,” the comptroller’s report stated. “District officials need to improve budgeting practices and more effectively manage the district’s fund balance.”

The Sagaponack audit, which covered the district’s finances through June 30, 2017, found that unrestricted reserves had increased by $724,600 since state examiners last reviewed local budgeting in 2007. In the earlier examination, the comptroller’s office found that unrestricted funds exceeded the state's limit by 23 percentage points.

The district’s operating budget for the 2017-18 school year was $1.7 million. For the current academic year, the budget is nearly $1.54 million.

On Monday, the Sagaponack audit and fiscal reports for 17 other districts were reviewed by the state Board of Regents at its monthly meeting in Albany. What makes Sagaponack’s case unusual is the sheer size of the excess cash deposits in comparison with the scope of its operations.

Sagaponack, located in Southampton Town, is among the rare districts in New York State that operate one-room schoolhouses. The single classroom has a movable partition that can create two rooms for the current enrollment of 15 students in kindergarten through third grade.

Local school officials, in response to the audit, contended that Sagaponack’s miniscule size contributed to its need for a funding cushion. Officials explained that a small influx of additional students — especially any requiring special-education services — could place an unexpected strain on the district’s budget.

Moreover, the district in recent years has consistently lowered taxes, officials said.

“We take great pride in providing an outstanding educational program for our students,” the response letter stated. “Through careful budget planning, we have worked diligently to maintain our school facility, implement numerous technological upgrades, and, most importantly, create an environment that is stimulating, caring and supportive.”

The response was signed by Alan Van Cott, the district's superintendent, and Joseph Louchheim, who then was the school board president.

Van Cott, in a phone interview, thanked the comptroller’s office for its review and said the district recently took steps to lower its unallocated reserves. The superintendent added that he was out of the office and could not provide specific figures without checking with the district treasurer.

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