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Audit criticizes Schoharie school district for padding fund balance

Wednesday, December 18, 2013
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— State auditors contend the Schoharie Central School District has been overestimating how much it expected to spend over the past five years, suggesting the district collected more taxes than necessary.

Despite auditors’ reading of the numbers, the district has been putting the bulk of surplus funds back into the budget to reduce taxes for the upcoming school year, Superintendent Brian Sherman said.

“We give it right back,” he added.

The audit contends the district overestimated how much it expected to spend between 2008 and 2013.

Using estimates for spending that exceeded the ultimate amount of spending, the district spent $8 million less than budgets projected during the five-year period, according to the audit.

The audit makes several recommendations, including reducing property taxes and developing budgets using “realistic estimates” for spending.

“By maintaining excessive and/or unnecessary fund balance, combined with budgeting practices that generate repeated operating surpluses, the board [of education] and district officials have unnecessarily increased taxes and compromised the transparency of district finances to the taxpayers,” the audit states.

The audit suggests the district stop adopting budgets that apply surplus funds that won’t be spent.

The district of about 850 students operates on a $21 million budget and, over the past five years, earmarked an average of $1.1 million in reserves to cover projected deficits, according to the audit. During that period, the district used only $676,000 of that fund balance.

“As a result, although district officials planned for operating deficits totaling approximately $5.4 million by appropriating fund balance as a revenue source, the vast majority of the fund balance was not used because the district actually realized nearly $2.2 million in unplanned surpluses,” the audit states.

Although the district admitted to overestimating expenses, Sherman said the Board of Education applied most of the surplus money to the upcoming year’s tax levy. The district put about $900,000 towards the tax levy in the 2008-09 year and more than $1 million in each of the following four years.

Estimating less conservatively, Sherman said, could lead the district into a difficult situation when the state makes a major change in the aid provided to schools. State aid for the district was reduced by 8.53 percent for the 2010-11 school year and by 9.62 percent for 2011-2012, then increased by 8.86 percent for 2012-13.

The board’s budgeting practices, Sherman said, also shield the district from unexpected spending. Examples in the past year include the need for $100,000 in roof repairs and hiring two teachers unexpectedly, he said.

“We know that without any increase in state aid whatsoever to this district, we can survive now without cuts to staff for three years. I think that’s a pretty conservative approach,” he said.

The district is pursuing a corrective action plan.

 
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