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Comptroller’s audit claims SWR school district overestimated expenditures

A State Comptroller report criticized the Shoreham-Wading River school district for overestimating expenditures, building cash reserves above the legal limit while failing to adopt realistic budgets.

Officials defended the district’s financial standing after the state report last month.

According to the State Comptroller’s report, which details an audit of fiscal activity between July 1, 2013 and Dec. 31, 2016, the Board of Education adopted budgets that didn’t have reasonable expenditure and fund balance appropriations. The report also claimed the board appropriated fund balance and reserves it didn’t need to fund operations and the unassigned fund balance was nearly 11 percent of the ensuing year’s appropriations, which exceeds the statutory four percent limit.

“For fiscal year 2015-16, revenue estimates were generally reasonable,” the audit states. “The larger revenue variances for fiscal years 2013-14 and 2014-15 were due to the district receiving more state aid than expected. However, in two of the three years the board adopted budgets that overestimated expenditures and appropriated fund balance and reserves that it did not actually need to fund operations.”

The audit said the majority of the overestimated appropriations are from employee benefits, which were overestimated by an average of $2.4 million, or 13.2 percent, from fiscal years 2013-14 to 2015-16.

Other assets that were “consistently overestimated” included teacher salaries, by an average of $1.2 million or 6.6 percent, central services, by an average of nearly $678,000 or 11.5 percent, programs for students with disabilities by an average of $671,000 or 8.5 percent, and pupil transportation by an average of $277,000 or 7.5 percent.

In a written response, then-interim Superintendent Neil Lederer defended the district’s budgets, saying many factors — unknown insurance rates, economic and legislative factors, as well as unknown state aid amounts — plays a role in the district’s budgeting process.

“While we agree with the audit report that this approach to estimating did result in available funds each year, the district adheres to a conservative approach within the budget development process in order to be able to operate under a worst-case scenario,” Mr. Lederer wrote. “Utilizing this approach has resulted in available funds, which are appropriated to the following year’s budget.”

Gerard Poole who started this month as the school’s next superintendent following Mr. Lederer. Mr. Poole declined to comment on the audit after Tuesday’s meeting but said he could speak further on Wednesday.

The comptroller’s office outlined three recommendations for the district: “to develop realistic estimates of appropriations and the use of fund balance in the annual budget, [to] discontinue the practice of adopting budgets that result in the appropriation of unassigned fund balance and reserves that are not needed to fund district operations” and to use the surplus fund balance in “a manner that benefits district residents,” which could include funding one-time expenditures, funding needed reserves and reducing district property taxes.

Mr. Lederer said the district will “look into its policy regarding budgeting for unanticipated appropriations and, where possible, align appropriations closer to actual anticipated expenditures,” and will review its options regarding surplus funds at the end of the 2016-17 school year.

“The district will be mindful of the recommendation highlighted within the audit when developing future budgets,” Mr. Lederer said. “We will remain committed to providing programs that promote educational excellence, in a safe and healthy environment, to the students of the Shoreham-Wading River School District.”

Residents approved a $74.8 million budget for 2017-18 in May with 53 percent of voters approving it.

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