Professional Documents
Culture Documents
OF THE
NEW YORK STATE COMPTROLLER D IVISION OF LOCAL GOVERNMENT & SCHOOL ACCOUNTABILITY
Thomas P. DiNapoli
Table of Contents
INTRODUCTION Background Objective Scope and Methodology Comments of District Ofcials and Corrective Action
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Response From District Ofcials Audit Methodology and Standards How to Obtain Additional Copies of the Report Local Regional Ofce Listing
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Division of Local Government and School Accountability March 2013 Dear School District Ofcials: A top priority of the Ofce of the State Comptroller is to help school district ofcials manage their districts efciently and effectively and, by so doing, provide accountability for tax dollars spent to support district operations. The Comptroller oversees the scal affairs of districts statewide, as well as districts compliance with relevant statutes and observance of good business practices. This scal oversight is accomplished, in part, through our audits, which identify opportunities for improving district operations and Board of Education governance. Audits also can identify strategies to reduce district costs and to strengthen controls intended to safeguard district assets. Following is a report of our audit of the Niskayuna Central School District, entitled Financial Condition. This audit was conducted pursuant to Article V, Section 1 of the State Constitution and the State Comptrollers authority as set forth in Article 3 of the General Municipal Law. This audits results and recommendations are resources for district ofcials to use in effectively managing operations and in meeting the expectations of their constituents. If you have questions about this report, please feel free to contact the local regional ofce for your county, as listed at the end of this report. Respectfully submitted,
Ofce of the State Comptroller Division of Local Government and School Accountability
Introduction
Background The Niskayuna Central School District (District) is primarily located in the Town of Niskayuna in Schenectady County. The District is governed by the Board of Education (Board) which comprises seven elected members. The Board is responsible for the general management and control of the Districts nancial and educational affairs. The Superintendent of Schools (Superintendent) is the chief executive ofcer of the District and is responsible, along with other administrative staff, for the day-to-day management of the District under the direction of the Board. Responsibilities relating to the Districts nances and accounting records and reports are largely those of the Assistant Superintendent for Business, accounting supervisor, and the Treasurer. There are eight schools in operation in the District, with approximately 4,100 students attending these schools during the 2011-12 scal year. The District has a work force of approximately 750 employees. The Districts expenditures for the 2011-12 scal year were approximately $73.7 million, which were funded primarily with real property taxes, State aid, and grants. Objective The objective of our audit was to examine the Districts nancial condition. Our audit addressed the following related question: Are District ofcials effectively monitoring the Districts nancial condition to maintain a reasonable level of fund balance?
Our overall goal was to assess the adequacy of the internal controls put in place by ofcials to safeguard District assets. To accomplish this, we performed an initial assessment of the internal controls so that we could design our audit to focus on those areas most at risk. Our initial assessment included evaluations of the following areas: nancial oversight, cash receipts and disbursements, purchasing, payroll and personal services, and information technology. Based on that evaluation, we determined that controls appeared to be adequate and limited risk existed in most of the nancial areas we reviewed. We did determine risk existed in the Districts nancial condition and, therefore, we examined the Districts nancial condition for the period July 1, 2010, to March 31, 2012. We conducted our audit in accordance with generally accepted government auditing standards (GAGAS). More information on such standards and the methodology used in performing this audit is included in Appendix B of this report. DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 3 3
The results of our audit and recommendations have been discussed with District ofcials and their comments, which appear in Appendix A, have been considered in preparing this report. District ofcials generally agreed with our recommendations and indicated they planned to initiate corrective action. The Board has the responsibility to initiate corrective action. Pursuant to Section 35 of the General Municipal Law, Section 2116-a (3)(c) of the Education Law, and Section 170.12 of the Regulations of the Commissioner of Education, a written corrective action plan (CAP) that addresses the ndings and recommendations in this report must be prepared and forwarded to our ofce within 90 days. To the extent practicable, implementation of the CAP must begin by the end of the next scal year. For more information on preparing and ling your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. The Board should make the CAP available for public review in the District Clerks ofce.
Financial Condition
A school districts nancial condition is a primary factor in determining its ability to continue providing public educational services for students within the district. The Board, Superintendent, and Assistant Superintendent for Business are accountable to taxpayers for the use of District resources and are responsible for effective nancial planning and management of district operations. District ofcials have a responsibility to ensure that their tax burden is not greater than necessary. Therefore, it is essential that ofcials develop reasonable budgets and manage fund balance responsibly and in accordance with statute. Sound budgeting practices coupled with prudent fund balance management ensures that sufcient funding will be available to sustain operations, address unexpected occurrences, and satisfy long-term obligations or future expenditures. District ofcials appropriation of fund balance in excess of the amount actually available to fund operations resulted in an unassigned fund balance decit of $1.5 million as of June 30, 2011. District ofcials addressed this situation by implementing reductions to budgeted expenditures in the 2011-12 scal year. The Districts latest annual report shows the decit was eliminated as of June 30, 2012. Unassigned Fund Balance A key measure of the Districts nancial condition is its level of fund balance, which is the difference between revenues and expenditures accumulated over time. When maintained at reasonable levels, fund balance provides cash ow and can be used to help nance the next scal years operations. The restricted portion of fund balance represents the amount that the District may use only for specic purposes. The unrestricted portion of fund balance is the amount that may be appropriated to fund programs in the next years budget. In preparing the budget, the Board is responsible for estimating how much fund balance will be available at scal year-end. Accurate estimates help ensure that fund balance used toward nancing District operations is not budgeted in an amount in excess of what is actually available. For the scal year ended June 30, 2011, the Board planned to use approximately $4.1 million of fund balance to fund operations of the 2011-12 scal year. This amount included $1.1 million from the debt service, retirement contribution, and tax certiorari reserve funds. The remaining $3 million was from excess unrestricted fund balance. However, District ofcials miscalculated the amount of fund balance that would be available at the end of the scal year, and they appropriated fund balance in excess of the amount that was actually DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 5 5
available. This resulted in an unassigned fund balance decit of $1.5 million. Table 1 illustrates the Districts fund balance as of June 30, 2011, and 2012. Table 1: Fund Balance as of June 30
2011 Non-Spendable Workers Compensation Reserve Unemployment Insurance Reserve Retirement Contribution Reserve Insurance Reserve Tax Certiorari Reserveb Compensated Absences Reserve Debt Reserve
c
2012
$322,600
$272,167
Committed Fund Balance Assigned Appropriated Fund Balance Unassigned Fund Balance Total Fund Balance
a b
2012 information taken from the Districts unaudited ST-3 Balance due to signicant certioraris outstanding c Reserve used to pay off debt
When fund balance is assigned as a funding source, the expectation is that there will be a planned operating decit in the ensuing scal year equal to the amount of the assigned, appropriated fund balance. For example, in the 2010-11 scal year, District ofcials budgeted for a $3,825,000 operating decit, which was covered through the planned use of fund balance (see Table 2). The actual operating decit for that year, about $3,993,000, was close to the budgeted decit. For the 2011-12 scal year, if actual results had been in line with the budget, the Districts total fund balance would have been reduced by $4.1 million. Instead, the Districts reported 2011-12 nancial information shows that the District ended the scal year with an operating decit of only about $265,000, rather than $4.1 million as originally planned in its adopted budget. This was due mainly to a 6 OFFICE OF THE NEW YORK STATE COMPTROLLER
positive variance in expenditures, primarily by cutting salary costs. The smaller-than-planned operating decit for 2011-12 allowed the District to eliminate the unassigned fund balance decit that existed as of June 30, 2011, and appropriate $2.5 million of fund balance to nance operations in the 2012-13 scal year. A decline in unassigned fund balance weakens the Districts nancial condition and could impact the level of services provided to students in subsequent years. An unassigned fund balance decit also limits the amount of fund balance that District ofcials can appropriate to balance subsequent years budgets. Appropriation of Fund Balance It is important that the Board maintain a reasonable amount of fund balance and adopt budgets that include realistic estimates of revenues and expenditures and use surplus fund balances as funding sources when appropriate. A comprehensive, written fund balance policy that addresses the appropriate level of fund balance to maintain and the rationale for establishing reserve funds can help the Board meet these needs. Historically, the District has appropriated fund balance to fund the subsequent years budget. Table 2 illustrates the Districts use of fund balance for the past three budgets: Table 2: Budgeted Appropriation of Fund Balance
2010-11 Use of Reserves Appropriated Fund Balance Total Planned Use of Fund Balance $475,000 $3,350,000 $3,825,000 2011-12 $1,084,549 $3,055,750 $4,140,299 2012-13 $1,354,259 $2,500,000 $3,854,259
Because the Board has not adopted a comprehensive, written policy governing the appropriate level of fund balance to maintain, or the establishment and use of reserve funds, and because District ofcials have regularly used fund balance to fund budgeted expenditures, we reviewed the 2012-13 budget to determine if the revenue and expenditure estimates were reasonable. The Districts 2012-13 budget includes revenues of $71.5 million and expenditures of $75.3 million, which is a $1.9 million decrease in planned expenditures from the prior year budget. Based on our review of the budgeted revenues and expenditures for 2012-13, we found the projections in the adopted budget to be reasonable. District ofcials must remain cognizant that the continual use of fund balance will result in its eventual depletion, requiring other revenue DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 7 7
sources to fund operating expenditures. For example, the District has appropriated $3,854,259 of fund balance toward 2012-13 scal year operations. If actual results are in line with the budget, unreserved fund balance will be reduced to about $31,000 as of June 30, 2013. An over-reliance on fund balance as a source to nance operations results in a lower tax levy for the current year, but it could also create a situation where the District needs to increase real property taxes if fund balance is no longer available for use in the subsequent year. This situation could result in the need for a tax levy in excess of the amount allowed by the tax cap statute. Recommendations 1. The Board should adopt a comprehensive fund balance policy that clearly communicates to District taxpayers the Boards decision on the appropriate level of fund balance to maintain, and the purpose and intent for establishing each reserve fund, the manner in which the Board will fund and maintain each reserve fund, the optimal or targeted funding levels for each reserve fund, and the conditions under which the Board will use or replenish the assets in each reserve. 2. District ofcials should continue to closely monitor the Districts use of fund balance to ensure that action is taken, if necessary, to identify other funding sources that can be used if fund balance is no longer available to fund District operations.
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We conducted this performance audit in accordance with generally accepted government auditing standards (GAGAS). Those standards require that we plan and perform the audit to obtain sufcient, appropriate evidence to provide a reasonable basis for our ndings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our ndings and conclusions based on our audit objective.
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Ofce of the State Comptroller Public Information Ofce 110 State Street, 15th Floor Albany, New York 12236 (518) 474-4015 http://www.osc.state.ny.us/localgov/
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APPENDIX D OFFICE OF THE STATE COMPTROLLER DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY
Andrew A. SanFilippo, Executive Deputy Comptroller Steven J. Hancox, Deputy Comptroller Nathaalie N. Carey, Assistant Comptroller
BUFFALO REGIONAL OFFICE Robert Meller, Chief Examiner Ofce of the State Comptroller 295 Main Street, Suite 1032 Buffalo, New York 14203-2510 (716) 847-3647 Fax (716) 847-3643 Email: Muni-Buffalo@osc.state.ny.us Serving: Allegany, Cattaraugus, Chautauqua, Erie, Genesee, Niagara, Orleans, Wyoming Counties
ROCHESTER REGIONAL OFFICE Edward V. Grant, Jr., Chief Examiner Ofce of the State Comptroller The Powers Building 16 West Main Street Suite 522 Rochester, New York 14614-1608 (585) 454-2460 Fax (585) 454-3545 Email: Muni-Rochester@osc.state.ny.us Serving: Cayuga, Chemung, Livingston, Monroe, Ontario, Schuyler, Seneca, Steuben, Wayne, Yates Counties
GLENS FALLS REGIONAL OFFICE Jeffrey P. Leonard, Chief Examiner Ofce of the State Comptroller One Broad Street Plaza Glens Falls, New York 12801-4396 (518) 793-0057 Fax (518) 793-5797 Email: Muni-GlensFalls@osc.state.ny.us Serving: Albany, Clinton, Essex, Franklin, Fulton, Hamilton, Montgomery, Rensselaer, Saratoga, Schenectady, Warren, Washington Counties
SYRACUSE REGIONAL OFFICE Rebecca Wilcox, Chief Examiner Ofce of the State Comptroller State Ofce Building, Room 409 333 E. Washington Street Syracuse, New York 13202-1428 (315) 428-4192 Fax (315) 426-2119 Email: Muni-Syracuse@osc.state.ny.us Serving: Herkimer, Jefferson, Lewis, Madison, Oneida, Onondaga, Oswego, St. Lawrence Counties
HAUPPAUGE REGIONAL OFFICE Ira McCracken, Chief Examiner Ofce of the State Comptroller NYS Ofce Building, Room 3A10 Veterans Memorial Highway Hauppauge, New York 11788-5533 (631) 952-6534 Fax (631) 952-6530 Email: Muni-Hauppauge@osc.state.ny.us Serving: Nassau and Suffolk Counties
STATEWIDE AUDITS Ann C. Singer, Chief Examiner State Ofce Building - Suite 1702 44 Hawley Street Binghamton, New York 13901-4417 (607) 721-8306 Fax (607) 721-8313
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