Download the audit and school district response.
The New York State Comptroller’s Office issued a report today critical of school district finances from July 1, 2014 to August 31, 2017 and extra-classroom activity accounts maintained by student clubs and organizations.
The report says that, over the three-year period, appropriations exceeded expenditures by $11.1 million or 7.8 percent. That means that budget lines were not completely spent down each year and the remaining balance in each budget line was carried over to the following school year through the appropriated fund balance.
The report says that during the three-year period, while the Board of Education allocated an average of $3.6 million of fund balance “annually to finance operations, the district did not need or use it because appropriations were overestimated. Instead, it realized annual operating surpluses and not a budget operating deficit.”
The report also notes that Scotia-Glenville reduced the tax levy in two of the three years under review – 2015-16 and 2016-17. However, the report says that if appropriations had been more closely budgeted, perhaps tax levy increases in the 2014-15 and 2017-18 would not have been needed.
State law allows school districts to include up to 4 percent of unrestricted fund balances to pay for the following year’s appropriations. “Any unrestricted fund balance over this percentage should be used to finance one-time expenditures, fund reserves or reduce the real property tax levy,” the report says.
The district provided a list of instances in which one-time expenses were paid from the fund balance in the budget, everything from relocating electric service at the high school, installing a card access system, adding the secure door systems, installing fencing, remodeling the Distance Learning Lab, replacing a sewer drain at the high school and paving parking lots.
“Schools face many challenges when it comes to budgeting,” said Superintendent Susan Swartz. “When we develop a budget in the spring of one year, we are trying to project all expenses – seen and unforeseen – for the next 14 or 15 months. That is a tremendous challenge in this age of unexpected rising costs in everything from health insurance to gasoline.”
In addition, school districts must accept all students who move into the district boundaries. If a high-needs student moves in, perhaps costing between $30,000 to $60,000 annually to educate, the district has no choice but to fund that child’s education, she said. That is why budget lines can not be spent until they are empty each year; a budget has to have a certain amount of cushion.
Swartz noted that the report does not indicate that money was found to be missing or stolen. No laws were broken. She also said that the school district hires an independent, external auditor – now West & Co. and previously Marvin and Co. – to conduct thorough reviews of district finances each year, not specific areas such as the comptroller reviewed. Swartz said that these annual audits, at least since 2005, have been “clean” with no corrective recommendations. The state comptroller conducts school district audits every five years.
She also added that Scotia-Glenville has the lowest tax rate in Schenectady County and the five reserve accounts are either underfunded or are funded on a specific schedule.
The comptroller states that “revenue estimates and appropriations should be based on historical data or known trends.”
The report makes some specific notations:
- Health insurance costs were overestimated each year by an average of $693,928 or 11 percent. The district said that it includes an additional $350,000 each year in case employees who do not receive insurance opt to purchase it. However, the comptroller said that is not supported by “historic expenditure trends” and that there was already $344,000 in unspent appropriations in that budget line.
- Payments to the NYS Teachers’ Retirement System were overestimated each year by an average of $320,810. The district says those costs were overestimated because the final employer contribution rates had not been finalized by the retirement system.
- The district appropriated $150,000 each year for outside-the-district contract transportation but did not use any of the money. The district says that money is included in case there is a need in the middle of the school year to add transportation routes outside the school district. The report noted that the current budget includes a $140,000 cost for contract transportation that will likely be spent because of the ongoing bus driver shortage.
The report also says that the Board of Education, in preparing the budget, should have used money set aside in reserve accounts in the budget instead of simply budgeting money in that budget line each year.
For example, the report says that the five reserve accounts in the budget have a total of $3.1 million. It says this is happening because the board needs to “establish an adequate reserve fund plan and policy that identifies when to use reserve funds and when to replenish them.”
The district, in its response, showed minutes from June 2015 in which reserve accounts were formally increased and decreased.
The report also said the district needed to establish a multi-year financial plan. The district, again in it’s response, showed that a five-year plan was presented to the Board of Education in August 2013.
Extra-classroom activity accounts
The report was also critical of student club financial accounts or extra-classroom activity accounts. the accounts are overseen by club advisers, student treasurers and central treasurers in each building. Certain items must be accounted for and deposit paperwork completed by the advisers and treasurers.
The report reviewed 24 remittances totaling $52,736 made by eight clubs “and found that all were supported by a properly authorized deposit form, accurately accounted for in the central treasurers’ ledgers and deposited intact and timely.”
However, in 16 instances, student treasurers failed to “maintain adequate records for collections, such as receipts or other documentation supporting the sources, dates and amounts of collections.”
In some instances, the student treasurers did not keep copies of deposit slips forwarded to the central treasurer to deposit fundraising funds.
“We could not verify that the club collected all money due or whether the collections were remitted to the central treasurer intact,” the report states.
Swartz noted that these are clubs run by students. Being a club treasurer “teaches them about fiscal management. I expect students will make mistakes while learning.”
The district said it will convene a meeting with all clubs and advisers to review the proper procedure of collecting funds and depositing them.