Chatham Central School District – Financial Management (2023M-11)

Issued Date
August 11, 2023

Audit Objective

Determine whether the Chatham Central School District (District) Board of Education (Board) and District officials properly managed fund balance and reserves.

Key Findings

The Board and District officials did not properly manage fund balance and reservesThe Board and District officials’ consistent practice of appropriating fund balance that is not needed and maintaining unreasonable reserve balances circumvents the statutory limit on surplus fund balance and lacks transparency. The Board and District officials:

  • Annually appropriated over $1.3 million of fund balance they did not need or use to finance operations; therefore, taxpayers were taxed more than necessary.
  • On average, annually over-estimated appropriations by $3.2 million (9.9 percent).
  • Maintained four reserves totaling $6.6 million without demonstrating they were reasonably funded. For example, the
    • Unemployment insurance reserve has about $747,000, enough to pay annual claims for 14 years.
    • Workers’ compensation reserve has $1.4 million, but the average annual workers’ compensation expense is $79,756.

Key Recommendations

  • Use reasonable appropriation estimates and do not appropriate fund balance that is not needed.
  • Maintain reserves at reasonable levels.

Except as specified in Appendix A, District officials generally agreed with our recommendations and indicated they planned to take corrective action. Appendix B includes our comments on issues raised in the District’s response letter.