Audit Objective
Did the Haverstraw-Stony Point Central School District (District) Board of Education (Board) and officials effectively manage the District’s financial condition?
Audit Period
July 1, 2019 – April 8, 2024
We extended the audit scope period forward to June 30, 2024, to analyze financial trends.
Understanding the Audit Area
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 balance1, up to 4 percent of the budget, for unexpected occurrences and fluctuations in cash flow.
A realistic budget begins with sound estimates and well-supported budgetary assumptions based on historical data or known trends. Districts may establish reserves to restrict a reasonable portion of fund balance for a specific purpose, in compliance with statutory directives. A multiyear financial plan helps guide officials to develop future budgets and provides more transparency regarding the District’s long-term financial goals.
Between fiscal years 2019-20 and 2023-24, the District’s appropriations increased $45.1 million (19 percent), from $227.2 million to $272.3 million. The reserve fund balances averaged $58.5 million over the audit period, and at the end of fiscal year 2023-2024, totaled $52 million.
Audit Summary
The Board and District officials overestimated certain appropriations, underestimated certain revenues, as well as made unbudgeted year-end transfers totaling $94.4 million, which collectively reduced the effectiveness of managing the District’s financial condition. The Board and District officials also made it appear they needed more funding to meet operational needs than were needed by appropriating fund balance to balance the budget but generally did not need the appropriations. Because realistic budgets were not adopted, the Board and District officials accumulated significant fund balance. The variances between the budgets District officials presented to taxpayers and the District’s actual operational results during the audit period were over $118 million. As a result of these practices, the Board was not as transparent with taxpayers as they could have been during the budget process.
- Of the $94.4 million in year-end transfers, $57.6 million went to the District’s reserves. In some circumstances, the year-end transfers totaling $19.1 million were also not approved by the Board before the transfer was made. However, to help promote transparency, anticipated funds to be placed in reserves should be included in the annual budget.
- The Board also did not develop a written reserve fund policy which, if established, could provide guidance on the optimal funding levels of each reserve or conditions under which each reserve would be used or replenished. By transferring the surplus funds into the reserves, officials also reduced the surplus fund balance in four of the five years to make it appear the District was not retaining more funds than statutorily permitted.
- The District consistently overestimated its general fund appropriations by an average of $4.8 million in each of the five years we reviewed, for a cumulative total of approximately $23.8 million.
- The District underestimated revenues by an average of $4.6 million each year, for a cumulative total of approximately $22.9 million.
- The Board did not effectively manage the District’s fund balance over the last five fiscal years, resulting in operating surpluses that increased the surplus general fund balance to $11.4 million as of the end of fiscal year 2023-24.
- The Board appropriated fund balance that was not needed, because the District realized operating surpluses. Therefore, the District did not use the appropriated fund balance in four of the five years to fund operations.
- The District’s recalculated, surplus fund balance for fiscal years 2019-20 through 2023-24 for the general fund, as a percentage of the next year’s budget, was between 2 and 12 percent when adding in the appropriated fund balance, which is up to triple the State’s 4 percent statutory limit.
- The Board did not develop a written multiyear financial plan or develop a comprehensive capital plan. Without such plans, the Board cannot assess expenditure commitments, revenue trends, financial risks and the affordability of new services and/or capital investments.
The report includes eight recommendations that, if implemented, will improve the District’s financial management. District officials disagreed with certain aspects of our findings. Appendix D includes our comments on issues raised in the District’s response.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and Office of the New York State Comptroller’s (OSC) authority as set forth in Article 3 of the New York State General Municipal Law (GML). Our methodology and standards are included in Appendix E.
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 GML, Section 2116-a (3)(c) of the New York State Education Law (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.