New York State Comptroller Thomas DiNapoli issued a critical report on the Monroe-Woodbury school district, accusing the district of hiding millions of dollars in operating surpluses while increasing the tax levy by over 9 million dollars during the last three years.
As the recent Citizens Advisory Committee on the Budget report has pointed out, New Rochelle has been doing the same thing since Schools Superintendent Richard Organisciak took office in 2006.
STATE AUDIT: MONROE-WOODBURY CSD INCREASED TAX LEVY $9.3 MILLION WHILE HOLDING $13.6 MILLION SURPLUS
Financial Shifts Not Fully DisclosedThe Monroe-Woodbury Central School District overestimated appropriations, leading to more than $13.6 million in operating surpluses, according to an audit released today by State Comptroller Thomas P. DiNapoli. The school district failed to fully inform the public of this surplus while increasing the tax levy for the last three fiscal years by a total of $9.3 million.
“The district collected more than was needed and amassed large surpluses without full transparency,” DiNapoli said. “Monroe-Woodbury should adopt
our recommendations to improve district operations.”The Monroe-Woodbury district, in Orange County, covers seven schools with 7,400 students and has 2011-12 budgeted expenditures of $149 million. State law bars school districts from accumulating reserve funds beyond what is needed to address long-term debt or planned expenditures.
The audit found that the district consistently overestimated expenditures. During the three years covered by the audit, 2008-09 through 2010-11, the accumulated fund balance exceeded the statutory limit of 4 percent of the ensuing years’ budgets.
DiNapoli’s auditors also found that the district did not comply with the general municipal law requiring district officials to make audit reports readily available and failed to submit 12 required quarterly reports to the Comptroller’s office related to a $6 million debt issuance in 2003.
DiNapoli’s office recommends that district officials:
· Develop budget projections that consider the prior year’s financial results and ensure that the fund balance assigned to cover expenditures is actually used.
· Create a plan to use the surplus fund balance to benefit district taxpayers by reducing property taxes, paying off debt or financing
one-time expenses; and
· Make sure the budget process, audited financial statements and audit reports are available to the public on the district’s website.The district’s full response took issue with some of the audit’s findings. Its response is included in the audit report.
A few highlights from the Monroe-Woodbury CSD Audit of special relevance to New Rochelle CSD
The OSC report explains the responsibilities of the school board, the Superintendent and Assistant Superintendent for Business. They are responsible for accurately estimating budgetary appropriations, that funds not be accumulated in the reserve funds beyond what is needed to address long-term obligations or planned expenditures, that taxpayers be given the opportunity to provide input when decisions are made to not return surplus funds to the taxpayers, and that they must use the most current and accurate information available to ensure that budgeted appropriations are not overestimated, and that the fund balance that is assigned as a funding source is actually used in the next fiscal year to cover expenditures.
This is precisely what Talk of the Sound has been pointing out for the past two years. It was a main platform in my campaign for school board. It is a focus of the report from the Citizens Advisory Committee. New Rochelle consistently overstates expenditures. This is not a theory or speculation but a demonstrable fact, highlighted in the CAC report, and proven by the fact that despite never budgeting for tax certioris refunds, the school district has paid out over $15 million in such refunds since 2006. Where did that money come from if it is not in the budget? It is in the budget but hidden.
There is a similar, related, issue with the fund balance or “rainy day” reserve fund kept by the district which has been allowed to exceed the legal limit of 4% of the total budget by artificially labeling millions as “allocated” for various purposes for which it is never used. In Monroe-Woodbury none of the assigned fund balance for any of the three fiscal years was used to cover expenditures. The audit report says “Education Law requires that funds placed in this reserve be used only for tax certioraris arising from the tax roll of the year in which the moneys are placed in the reserve.”
The exact same sort of things has been occurring in New Rochelle and, worse, the district actually bonded for an additional $5 million when they were already over the legal limit in their fund balance.
Another area in which the Monroe-Woodbury budget, precisely like the New Rochelle budget, has been inflated and padded to the tune of many millions of dollars is employee benefits such as health insurance premiums, and social security and retirement system contributions.
Given the nature of these expenditures, the Board could have easily estimated the annual costs with a high degree of precision. The Board knew these items were overestimated in previous budgets and should have used the prior year’s actual results, each year, to ensure they were more accurately estimated.
What the auditors found in Monroe-Woodbury is identical to New Rochelle:
- District officials consistently overestimated budgetary appropriations despite data they should have used to develop more accurate estimates.
- District officials generated over $13.6 million in operating surpluses which caused the accumulated fund balance to exceed the statutory maximum of 4 percent1 of the ensuing year’s budget.
- District officials transferred moneys to the District’s reserves, which caused the reserves to be overfunded by $6 million, in effect circumventing the 4 percent limit.
- District officials did not include the transfers to the reserves in the budgets.
- District officials did not make financial information readily available to the public.
The Comptroller reached the following conclusion:
Due to this lack of transparency, the taxpayers were deprived of the opportunity to provide input each year when District officials decided not to return surplus funds to the taxpayers. In fact, District officials increased the tax levy each year, despite budget reviews from the Office of the State Comptroller (OSC) that warned District officials about their budgeting practices.
The responsibilities of school officials, the audit findings and the Comptroller’s conclusions all match perfectly the situation in New Rochelle as a result of which the voters of New Rochelle have been denied the opportunity to vote on an accurate tax levy requirement needed to fund the annual school budget and had their pockets picked to the tune of tens of millions of dollars since Schools Superintendent Richard Organisciak was hired in 2006.
To a large degree, readers can substitute the words “New Rochelle CSD” for “Monroe-Woodbury CSD” in the Monroe-Woodbury CSD audit
and get a very clear picture of the financial