Audit Objective
Did the Remsenburg-Speonk Union Free School District (District) Board of Education (Board) and District officials properly manage fund balance?
Audit Period
July 1, 2019 – June 30, 2024
Understanding the Program
A key measure of a school district’s financial condition is its level of fund balance, which represents the difference between revenues and expenditures accumulated over time. School districts may retain a portion of surplus fund balance,1 up to 4 percent of the budget, for unexpected occurrences and fluctuations in cash flow.
In fiscal year 2023-24, the District’s general fund expenditures were $14.6 million and it educated approximately 125 students in grades K-6. The District also paid tuition to neighboring districts to educate nearly 160 students in grades 7-12.
Audit Summary
The Board and District officials did not properly manage the District’s fund balance. The Board appropriated surplus fund balance, in part, because it adopted budgets that annually overestimated appropriations by an average of $1.3 million (9 percent) per year, or a cumulative total of approximately $6.4 million. The majority of the overestimated appropriations ($5.6 million) were for special education instruction.
From fiscal years 2019-20 through 2022-23, the District’s reported surplus fund balance ranged from 10 to 15 percent of the upcoming year’s budget, which was nearly $962,000 to $1.8 million over the 4 percent statutory limit. While District officials appropriated a total of $5.5 million of surplus fund balance over the last five years, the officials only used $350,000 of this amount after experiencing operating surpluses in four of the last five years. When the unused appropriated fund balance is added back to the District’s reported surplus fund balance, the recalculated amount ranged from approximately 12 to 23 percent of the upcoming year’s budget, which exceeds the statutory limit by 8 to 19 percentage points. At the end of the 2023-24 fiscal year, the recalculated surplus fund balance was $1.9 million, which exceeded the statutory limit by nearly $1.3 million.
Further, despite having excess surplus fund balance available to appropriate in the budgets, the Board increased taxes by an average of about $318,000 (2 percent) each year from 2019-20 to 2023-24. By continually overestimating appropriations and appropriating fund balance that is not needed, the Board is not presenting the District’s budget and its surplus fund balance in a transparent manner.
The Board and District officials’ consistent budgetary practice of appropriating fund balance that is not needed to finance operations results in real property tax levies that are higher than needed.
The report includes three recommendations that, if implemented, will improve the District’s management of fund balance. District officials generally agreed with our recommendations and indicated they planned to initiate corrective action.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and the State Comptroller’s authority as set forth in Article 3 of the New York State General Municipal Law. Our methodology and standards are included in Appendix C.
The Board has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report must be prepared and provided to our office within 90 days, pursuant to Section 35 of the New York State General Municipal Law, Section 2116-a (3)(c) of the New York State Education Law and Section 170.12 of the Regulations of the Commissioner of Education. To the extent practicable, implementation of the CAP must begin by the end of the next fiscal year. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. The CAP should be posted on the District’s website for public review.
1 For guidance on fund balance classification and reporting, see https://www.osc.ny.gov/files/local-government/publications/pdf/gasb54.pdf.