A March 13 report from the New York State Comptroller’s Office found that Edmeston Central School District officials continuously overestimated certain budgetary appropriations and accrued an excessive fund balance.
The district’s surplus fund balance totaled approximately $972,000, exceeding the statutory limit by approximately $535,000 or five percentage points, according to the report. When unused appropriated fund balance was added back to the surplus fund balance, it totaled more than $1.1 million, exceeding the statutory limit by approximately $680,500 or six percentage points.
“A district may retain a portion of fund balance to provide a cushion against unforeseen events and to provide for fluctuation in cash flow,” the report read. “Officials should ensure that surplus fund balance does not exceed the amount allowed by New York Real Property Tax Law, which is no more than 4% of the next year’s budgeted appropriations.”
“In a rural district such as ours, the District believes that it is necessary to be mindful of the possible contingencies that may occur such as special education services, mandated transportation services, and changes in health care and related benefits, as a small change in any of these areas can significantly change our financial standing,” district Superintendent Gary Furman wrote in his response to the report.
A comparison of estimated revenues and appropriations to actual operating costs from the 2016-2017 school year to the 2018-2019 school year found that total revenue and appropriation variances were “generally reasonable,” averaging 1% and 4% respectively, according to the report.
The report also found that some appropriations were “significantly overestimated,” including programs for students with disabilities, which was overestimated an average $187,000, or 15%, and employee benefits, which were overestimated an average $184,000, or 7%.
“It wasn’t anything we did to inflate the fund balance,” Furman told The Daily Star, noting that students requiring special services moving out of the district and teachers leaving unexpectedly could create operating surpluses.
“In rural districts, our budgets aren’t that large,” he continued. “A 2% increase is only $50,000. We have to be very mindful of things. I think the board’s been doing a great job of being mindful.”
District officials told auditors that the budgets “provided a cushion in certain budget line items in case of emergency or to cover unexpected expenditures,” according to the report.
The budgeting practices “made it appear that the District needed to both increase real property taxes and use appropriated and reserve funds to close projected budget gaps,” but because of the operating surpluses, the fund balance was not needed, according to the report.
“Given the District’s budgeting practices and fund balance levels, the Board levied more taxes than necessary to sustain operations and may have missed opportunities to more effectively manage fund balance and reduce real property taxes,” the report read.
Comptroller’s Office officials recommended that the district adopt budgets with reasonable estimates for appropriations and develop a plan to reduce surplus fund balance, noting that unrestricted fund balance can be used to reduce property taxes, fund one-time expenditures and needed reserves or pay off debt.
District officials said they planned to address the excessive fund balance by funding the retirement reserve at the allowed level and establishing a capital reserve fund for a future project, according to the report.
Furman said officials are drafting a corrective action plan to be submitted to the Comptroller’s Office within 90 days of the report filing.
“We try to do what’s best for our students and for the community we live in,” he said.
Sarah Eames, staff writer, can be reached at email@example.com or 607-441-7213. Follow her @DS_SarahE on Twitter.