2014-15 External Audit Report & Corrective Action Plan

The 2014-15 External Audit Report for the Commack School District (CSD) was approved by the BOE at the Oct 15, 2015 meeting and is available on the CSD web site. The report indicates a continuation of the long standing violation of the NYS Real Property Law (refer to patch.com/new-york/commentary-commack-school-district-response-nys-audit-report-0). In 2014-15, actual expenditures were $178.1M (excluding encumbrances); the adopted expense budget was $183.2M so that the adopted budget overestimated actual expenses by $4.9M. The cumulative overestimate of the expenditure budget for 5 years (2010-11 thru 2014-15) was $24.9M. Despite these consistently misleading and “unreasonable” (refer to NYS Comptroller Audit Report for Commack School District, July 2015) budgets, that minority of Commack residents casting votes approved these budgets.

The budget for revenues was $174.3M. In somewhat of a surprise (and anomaly), actual revenues were ($176M – over budget by $1.7M. However, the actual expenses of $178.1M exceeded actual revenues resulting in an operating deficit of $2.1M. This is the second consecutive year that CSD has operated at a deficit (deficit =$1.75M in 2013-14). For reasons known only to themself, the Commack BOE chose not to use part of the budgeted appropriated fund balance ($8.3M) to pay for this deficit. Instead the “unassigned fund balance” was raided. The unassigned fund balance is intended for emergencies. But, when you exceed your budget for revenues by $1.7M and you have an under run of $4.9M in expenditures , there is no emergency. So why would the BOE use emergency funds instead of appropriated funds? (Note that appropriated funds were increased by $576,872, and total fund balance as of 06/30/2015 is $34.7M).

The External Audit Report closes with a letter from the auditors regarding Internal Control over Financial Reporting and on Compliance and other Matters. Under the latter, the auditors state that “we noted certain matters that we have reported to the Board of Education, Audit Committee, … in a separate letter dated Oct 2, 2015.”
That letter is technically part of the audit, and therefore must be published by the District..

In a previous Patch article (referenced in the first paragraph), I reviewed the “response” of the CSD to the criticisms in the NYS Comptrollers Audit Report (July 2015). The report included recommendation that the Board should (#1) develop procedures to ensure it adopts more reasonable budgets…, and (#2)discontinue the practice of adopting budgets that result in the appropriation of unrestricted fund balance that will not be used to fund District operations. Further “a written corrective action plan (CAP) must be prepared and provided…:” to the Comptrollers office within 90 days. The BOE approved a CAP (prepared by District officials) at the October 15, 2015 meeting - but only after a heated exchange . Video of the meeting and a copy of the CAP (after over a week’s delay), is available on the CSD web site. Briefly, the discussion started with an observation by Trustee Tampellini pointing out the obvious, namely, that the proposed Corrective Action Plan did not seem to contain a Corrective Action Plan, and asked Dr James where such could be found in the letter. The Superintendent replied with comments such as “I’m not going to debate the letter”, “This is not a cross examination”, “I’m not answering any questions..”, and finally that “we do not agree” with the NYS Comptroller. Now that the CAP has been published, it is clear that a specific corrective action plan does not appear in the letter. (It also noted that the letter was sent to the Albany office of the NYS Comptroller rather than the local office (as requested), and there is no indication that the letter was copied to the NY Commissioner of Education, as required,
Regarding the above reco #1, there is little doubt that the Comptroller is indicating that present budget procedures used in Commack have resulted in unreasonable budgets, and that a change is needed. Much as it may offend the superintendent, this may be a rejection of “zero-based” budgeting, and a return to rollover budgeting. Even in a random walk process, the present value (in this case, last year’s expenses) is the best predictor of the “future”. (Of course, one projects on the basis of known trends, etc). The “approved” CAP should have done away with “zero-based”.Instead, it simply describes the present procedure.
Regarding reco #2, not only does the “approved” CAP not present a plan for discontinuing past practice, but it incorrectly states that “the district… used $2.1 million of appropriated fund balance to finance operations.” As I pointed out above, the deficit in 2014-15 was paid using the “unassigned fund balance” not the appropriated fund balance.

So the “approved” CAP is totally unresponsive to the Comptroller’s recommendations, and there is no way it can be “accepted” – there is nothing to accept. So what are the consequences? Posssible law suits? Threats to withhold state funding? Impeachments? None of these are in the best interests of the district.