Rochester Business Journal

Audit findings released Monday by state Comptroller Thomas DiNapoli show that while increasing the tax levy by 17 percent, Fairport Central School District accumulated $16.6 million in excess funds over five years.

The excess funds could have been used to benefit taxpayers by reducing the property tax levy or paying onetime expenses, DiNapoli said.

"All across New York, families are watching every dime and school districts need to do the same," DiNapoli said. "Fairport Central School District needs to use more realistic budget numbers. Taxpayers should not have to pay more property taxes than necessary."

The Fairport School District disagrees with the tone of the report and the comptroller’s implications that the district’s budgeting practices are unrealistic.

“In reading the report, you will note that it is less of an accounting document and more of a political statement; therefore the Comptroller’s Office in Albany used this report to present opinions about budgeting practices in the findings,” writes Jon Hunter, superintendent of schools, in a statement.

The audit of July 2003 to May 2009 found the district consistently overestimated expenditures and underestimated revenues, resulting in significant operating surpluses from 2003-04 through 2007-08, which totaled $26.2 million.

During the same period, the district's total fund balance in the general fund doubled from roughly $18.7 million in June 2004 to more than $37.8 million as of June 2008.

Auditors found that during these periods, the district increased the tax levy by 17 percent, from $51.9 million in 2003-04 to $60.9 million in 2007-08. In addition, the district's 2008-09 budget continued to support a substantial operating surplus of $7.4 million.

The audit found the Fairport district placed nearly $11.4 million in excess funds in reserves accounts and did not use the amounts appropriated, which could have reduced tax levies.

“The District has accumulated in excess of $16.6 million that should be used to benefit taxpayers by paying one-time expenditures, funding necessary reserves, reducing debt and/or reducing the tax levy, in accordance with applicable statutory requirements,” the audit says.

The district's $16.6 million in excess funds included:
 

• $4.06 million in a capital bus reserve;
• $3.8 million in overstated accrued liability;
• $2.84 million in a liability reserve;
• $1.64 million in a repair reserve;
• $1.5 million in appropriated fund balance that was not used;
• $1.4 million in an employee benefits accrued liability reserve;
• $819,810 in an insurance reserve; and
• $611,230 in an unemployment insurance reserve.

Among suggestions from DiNapoli's office are that officials:

• prepare budgets that realistically estimate revenues and expenditures;
• use the surplus fund balance to benefit district taxpayers by reducing property taxes, paying off debt or financing one-time expenses; and
• review all reserve funds and determine if the amount of money in each reserve is necessary and, if not, reduce the reserves to reasonable levels.

In the district’s response to the controller’s office, Hunter objects to the “specific tone in the draft report that amplifies subjective opinions with respect to the District’s fiscal operations and financial condition,” calling them “concerning and disappointing.”

“In an audit report such as this, it is inappropriate to use inflammatory phrases based on subjective opinion,” Hunter writes.

He also responds to the recommendations, including that district officials should ensure that liabilities are properly recognized and recorded.

“This type of recommendation implies that, in some manner, liabilities have not been properly recorded in the past; that is not accurate. In addition, the Comptroller’s decision to use terms such as ‘improper accounting’ and ‘accounting errors’ is not only inflammatory but incorrect,” Hunter said.

Click here to see the audit. For Fairport School District’s response, click here.

To improve accountability of the state's schools, DiNapoli's office will audit all of New York's school by 2010. The State Comptroller's office has completed 720 school audits and some 10 school audits are underway.

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