State Audit: Wainscott School Surplus Fund Balance 17 Times Greater Than Allowed By Law


The Wainscott Common School District has accumulated an unexpended surplus fund balance that’s 17 times greater than what’s legally allowed by the state, according to the New York State Comptroller’s office.

In the summary of his school audit released on Friday, State Comptroller Thomas DiNapoli wrote that, over the last five years, district officials have consistently underestimated revenues and overestimated expenditures in board-adopted budgets to the tune of more than $1.7 million.

The report notes that, for the 2011-12 school year, the district’s unexpended surplus funds totaled $2.4 million—or 68 percent of that year’s budget—when state law requires that that amount not exceed approximately $140,000, or 4 percent of the total budget.

The fiscal examination notes similar excessive surpluses dating back to the 2007-08 school year. For example, that year, the surplus totaled $1,675,483, or 54 percent of the ensuing year’s nearly $3.1 million budget. The district only should have set aside $124,000 in reserves at that time.

The district’s surplus jumped by more than $1 million between the 2010-11 and 2011-12 school years alone, from about $1.34 million to nearly $2.37 million, due to the same practice of overestimating costs and underestimating income, according to the report.

“The board appropriated unexpended surplus funds each year, for a five-year total exceeding $3.1 million, to help finance the ensuing year’s operations,” Mr. DiNapoli stated in the release. “However, the district actually used less than $1.9 million of the appropriated fund balance during this period and accumulated an unexpended surplus fund balance 16 times the amount allowed by statute.”

District officials also increased the real property tax levy by more than $325,000 during the same period, he added, and have not developed a multi-year financial plan to address their long-term operational needs or the use of unspent surplus money in a way that would benefit taxpayers.

School officials, who could not be immediately reached for comment, have 90 days to file a written correction action plan with the state comptroller office.

Mr. DiNapoli also wrote in his report that Board of Education members need to improve their “oversight and management” of the budget. The audit examined the district’s books from April 1, 2011, through April 30, 2013, though auditors went back to 2007 as part of their fiscal examination.

In a response to the Comptroller’s report, David Eagan, the president of the Wainscott School Board, wrote a letter explaining the circumstances around the school’s finances.

“As a result, we have made several changes to our fiscal oversight,” he wrote. “However, based on our unique circumstances, we cannot ascribe to the one-size-fits-all approach that is reflected in the report, and we fundamentally disagree with the report’s characterization of our budget estimates as being ‘unrealistic’ and ‘misleading;’ frankly, nothing could be farther from the truth, based on our history and purpose.”

He went on to say that the school receives virtually no state aid and relies almost entirely upon real estate taxes.

Additionally, he said that the school pays tuition and transportation fees to other schools to educate and bus students in the fourth through twelfth grades, since Wainscott School serves students from kindergarten through third grade. He said that not budgeting for unanticipated students—students that enroll unexpectedly—the school would run the risk of deficit spending.

“Over the last years the board has utilized fund balance to reduce the tax rate while maintaining all programs and our minimal staffing levels,” Mr. Eagan stated.

Wainscott operates one school, a kindergarten through third grade building, and instructs approximately 15 students. It also employs four full-time and nine part-time workers, according to the audit.

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