NYS Comptroller Blasts Commack Board for Inadequate Oversight of Budget Process

The NYS Comptroller’s Report on the financial condition of the Commack School District (CUFSD) was recently released, and can be accessed online at: www.osc.state.ny.us/localgov/audits/schools/2015/commack.pdf

The report covers three years: FY 2011-12 through 2013-14, and it comprises a major criticism of the financial management of CUFSD. It concludes that “The Board and District officials need to improve their oversight of the District’s budget process to adequately manage the District’s financial condition”. Two points are stressed, viz. (1) overestimation of expenditures, and (2) use of appropriated fund balance.

As shown in Figure 1 of the Audit Report, the 3-year total overestimate of expenditures was $24.8M representing an average overestimate of $8.3M per year (4.8%). The primary overestimates were for employee benefits ($8.9M), regular instruction ($4.5M), and Special Ed ($3M); this leaves $8.4M which apparently was distributed over various other budget items. The report notes the obvious: “Unrealistic budget estimates can mislead District voters and taxpayers…”

Data pertinent to the use of unrestricted funds is shown in Figure 2 of the Audit Report which indicates that the District’s practice of appropriating unrestricted funds that were not needed caused the District to exceed the statutory limitation of unrestricted fund balance. Average unrestricted funds as a percentage of ensuing year’s budget, as reported by the District, was 3.7%. However, the average effective unrestricted funds resulting from unused appropriated fund balance as a percentage of ensuing year’s budget was 6.9%. The statutory limit is 4%. “As a result, the District retained significantly more than the amount of unrestricted funds allowed.” CUFSD was apparently in violation of the statute for all three years.

The report recommends that the BOE “develop procedures to ensure it adopts more reasonable budgets…”, and “discontinue the practice of adopting budgets that result in appropriation of unrestricted fund balance that will not be used…”. According to the report, “District officials generally agreed with our recommendations …” The next step requires the BOE to submit a written corrective plan (CAP) within 90 days since “The Board has the responsibility to initiate corrective action.” Let’s hope that the “general agreement” translates into real improvements.

The audit also addressed the question of whether the District maintained complete and adequate fuel inventory records. Auditors could not account for over 5% of the purchased gasoline (value approximately $5628). The District has ”initiated corrective action”.

Appendix A of the Audit report includes a short letter from Dr James which states that his response is conditioned on the “understanding of certain changes to the draft discussed with the Comptroller’s regional Office:…”. It would be sad if negotiation would alter a single word of the audit report which, I hope, is based solely on the numbers. Note also that the brevity of Dr. James’ letter forestalled any rebuttal from the auditors.

Aside from the fuel inventory, there are really no surprises in the NYS Comptroller’s report on the CUFSD audit. In one sense, the report is disappointing since the illegal activities (defined as:not according to the law) have existed for longer than the 3 year audit period and they persist; the comptroller extended the audit of the Northport S.D. to five years, and that would have been appropriate in this case. Including the extra years would have added emphasis. The points about overestimation and the non-use of appropriated unrestricted fund balance, and its effect on the tax levy have been hammered home time and time again, and for many years - primarily by Trustee J. Tampellini, Mr. Fusco, and other members of the community. The Superintendent and the Assistant Superintendent for Business have been the main defenders of the budget process at BOE meetings supported by all Trustees other than Mr. Tampellini. How wrong and non-representative! Can they change? In view of the consistent way in which the Comptroller has reported on similar activities in other districts, the BOE and District officials must have expected the comptrollers disapproval of the budget process. In that regard, the operating deficit of $1.75M in 2013-14 and the probable deficit in 2014-15 may be relevant.

CUFSD has included a response to the audit report on their web site which seems at variance with their “general agreement” with the Comptroller’s Report. It’s tone is not promising.