Northport-East Northport Schools Board of Education Dr. Marylou McDermott Superintendent of Schools...
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Transcript of Northport-East Northport Schools Board of Education Dr. Marylou McDermott Superintendent of Schools...
Conserving Today,Protecting Tomorrow
Analysis of the NYS Comptroller’s AuditOctober 2014
Northport-East Northport Schools Board of Education
Dr. Marylou McDermottSuperintendent of Schools
Kathleen MolanderAssistant Superintendent for Business
Careful Attention to Taxpayer Resources
There are few things the Board of Education and District Administration take more seriously than the trust taxpayers place in us to make sound decisions with precious financial resources.
We are legally responsible for safeguarding the District’s financial resources .
Philosophy of Budgeting
Conserving Today and Protecting Tomorrow
• The District begins the budgeting process by projecting student enrollment and examining prior year’s expenditures
• The District reduces spending and manages its budget aggressively, wherever possible, while still maintaining and/or enhancing District programs
• When the District is successful in under-spending, the savings realized are used to lower the tax levy and fund the reserves
The District’s Record
Adopted budgets for 6 years with tax levies under 2%Prudently utilized reserves when appropriateReplenished reserves when feasible Maintained staff and programsMaintained class sizeEnhanced programs (AIS, Balanced Literacy, Go Math, Labs)Improved or enhanced facilities Infused Technology (Smart Boards, netbooks) Reduced positions through attritionExecuted Energy Performance Contract
Our Moody’s Aa2 ratings have been consistent over the years, and
Moody’s Investors Service has repeatedly commended the District for its
use of funds and financial flexibility.
That translates to lower borrowing costs.
Moody’s Investors Service
The District’s Greatest Challenge
LIPA/National Grid Tax Cert is Pending• Taxes Could Spike Dramatically
• Programs and Class Size Could BeSignificantly Affected
• Tax Cap remains challenging
So it is critical that we maintain our financial health and flexibility to secure our future!
Appropriately funded reserves will help ease the financial challenges that the tax cert could impose.
The NYS Comptroller’s Audit makes no mention of the LIPA/National Grid Tax Cert or
the ongoing challenges of the tax cap. These omissions seem odd, since we believe it is critical to have this context in place when
making decisions about building our budgets and funding our reserves. The future matters!
In other words, Our Philosophy of Budgeting Takes Into Account our Local Needs and as
noted by Moody’s is Acknowledged for Its Strength
The Comptroller’s Audit Does Not Consider Our Local Needs and Concerns
We will examine the basic concerns and recommendations of the audit.
But first, please know that:
• We have always complied with the law.• No malfeasance or criminality is suggested.
• No monies have been misappropriated.
NYS Audit Concerns…
… That overestimation of expenditures occurred from 2008-2013
…That the district has an ‘assigned fund balance’ while operating in a surplus
… That the balance in the Retirement Contribution Reserve is too high
The NYS Audit Stated the District Overestimated Expenditures in:
Special Education • Benefits • Debt Service
There are sound reasons:
• Significant cost fluctuation can occur after budget adoption
• Additional students enrolled in 2013-2014 after the budget was adopted; $700,000 in unanticipated expense
• Infusion of one-time Federal grant money in 2009-10 was used to pay special education staff, which generated a surplus in the general fund
The NYS Audit Stated the District Overestimated Expenditures in:
Special Education • Benefits • Debt Service
There are sound reasons:
• Health benefit increases not announced until January of following year
• This is six months into our fiscal year
• Estimates are highly conservative and often will result in overestimation of actual expenditures.
The NYS Audit Stated the District Overestimated Expenditures in:
Special Education • Benefits • Debt Service
There are sound reasons:
• Negotiations spanned multiple fiscal years and budget cycles
• Anticipated settlement monies were budgeted in benefit and debt service codes
• Preserves the integrity of negotiations
The assigned fund balance is monies generated in the current budget to apply to the following year’s budget to lower the tax levy.
The District has had an assigned fund balance for more than 30 years.
Only a handful of the 126 districts on Long Island do not have an assigned fund balance.
The District has reduced its assigned fund balance by $950,000 over the last two years.
The administration will continue to recommend to the Board that the assigned fund balance be further reduced.
Assigned FundBalance
The audit states that $21 million was ‘unnecessarily’ taxed to residents by the District since 2008-09.
The District believes this is a mischaracterization, since most of this money is from “assigned fund balance” which cannot be
accumulated. (In other words, assigned fund balance monies are carried over from year-to-year not added one year to the next.)
To be clear: we did not accumulate, nor do we currently hold, $21 million of taxpayer money, as the report implies.
2008-2009 2009-2010
2010-2011
2011-2012
2012-2013
Assigned Fund
Balance
$3,160,000 $3,500,000 $3,500,000 $3,775,000 $3,300,000
↓ ↓ ↓ ↓ ↓Give it back by lowering the tax
levy
Lowered tax levy
increase in2009-2010to 1.85%
Lowered tax levy
increase in2010-2011to 1.39%
Lowered tax levy
increase in2011-2012to 1.77%
Lowered tax levy
increase in2012-2013to 1.39%
Lowered tax levy
increase in2013-2014to 1.98%
Under-spending Used to Lower the Tax Levy the Following Year
Calculation of Tax Levy
2014-15 Operating Budget
$159,109,341
Less: Assigned Fund Balance
($2,825,000)
Less: Appropriation of Reserve Funds
($2,550,000)
Less: State Aid ($12,606,469)
Less Other Sources of Revenue
($2,504,705)
2014-15 Tax Levy $138,623,167
% Increase in Tax Levy 1.99%
District % Increase
District A 16.78%
District B 15.99%
District C 15.57%
District D 14.43%
District E 13.45%
District F 13.19%
District G 8.82%
Northport-East
Northport
6.56%
Town of HuntingtonTotal Tax Levy Percentage Increase
2008-2009 to 2012-2013
AuditRecommendations
District’sResponse
The Board should develop procedures to ensure it adopts more realistic budgets to avoid raising more real property taxes than necessary.
The District tax levy has been under 2% for the last six years, and since 2010, the District has work diligently to reduce overestimated budget expenditure codes. In fact, the District has run at an operating deficit for the past two years.
The Board should discontinue the practice of adopting budgets that result in the appropriation of unexpended surplus funds that are not needed to fund District operations.
The District has reduced its assigned fund balance by close to $1 million over the last two years. The administration will continue to recommend further reduction to the Board of Education in the years to come.
The Board should develop a formal plan indicating how reserves will be funded, how much will be reserved and when reserves will be used.
The District currently has a procedure for funding reserves that will be formalized into a plan and submitted to the Board of Education for approval.
AuditRecommendations
District’sResponse
The Board should ensure that budgets presented to the voters for approval are transparent and inform residents of their intent to increase reserves by including an appropriation that quantifies such increase.
The District budgets include line-by-line justifications, and print / electronic copies of all budget documents are available on the District web site. With regard to including a “reserves appropriation” in the budget, the District has sought guidance from the State on how to legally accomplish this. We are still awaiting a response.
The Board should reconsider the funding limit established for the retirement contribution reserve fund to reflect a balance that is in line with the actual retirement contribution expenditure trends.
We believe there is no provision in the law that establishes a limit on funding this reserve. We have asked for clarification from the Comptroller but have not received a response. Furthermore, the District’s reserves in 2014-2015 are less than the averages in New York State, Nassau and Suffolk.
June 2010 – reserve funded 4,405,000
2010-2011 – interest earned 23,597
June 2011 – reserve funded 3,600,000
2011-2012 appropriation of reserve to lower 2011-2012 tax levy
(1,750,000)
2011-2012 – interest earned 24,254
June 2012 – reserve funded 671,000
2012-2013 appropriation of reserve to lower 2012-2013 tax levy
(1,800,000)
2012-2013 – interest earned 14,099
June 2013 – reserve funded 1,050,000
Funding/Use of Retirement Contribution Reserve
2013-2014 appropriation of reserve to lower 2013-2014 tax levy
(1,800,000)
2013-2014 – interest earned 10,181
June 2014 – reserve funded 372,400
2014-2015 appropriation of reserve to lower 2014-2015 tax levy
(1,800,000)
June 2014 – actual balance 4,820,531
June 2015 – projected balance 3,020,531
Continued…
Average Restricted Reservesas a % of 2014-2015 Budget
NYS Average 13.5%Nassau Average 13.6%Suffolk Average 11.2%
Northport-East Northport 7.3%
In fact, in each of the past 7 years, our restricted reserves have been below the NYS average.
Where We Stand Today
• $2.8 million in assigned fund balance (to reduce the next year’s tax levy)
All but a handful of districts use the assigned fund balance each year, which lowers the tax levy. We have begun reducing this amount and plan to continue to do so.
• $10.8 million in restricted reserves to help reduce the tax levy each year
These are monies from surplus that are legally set aside into reserve accounts for specific purposes. Taxpayers benefit each year by having a portion of these funds returned to them through lowering the tax levy, helping preserve programs and keeping the tax levy steady.
• $1.2 million in two separate capital (facilities) reserve funds, also restricted
These two capital reserves, authorized by voters, are used to fund a variety of facility projects on an ongoing basis.
RESERVEDESCRIPTION
What is it for?
ActualJune 30, 2012
ActualJune 30, 2013
ActualJune 30, 2014
EBALR(Employee Benefit Accrued Liability Reserve)
Non-medical employee benefits upon leaving employment
$4,162,845 $3,777,403 $3,390,782
ERS(Employee Retirement System)
Non-teacher pension contributions
$6,973,851 $6,237,950 $4,820,531
UNEMPLOYMENT
State-required unemployment insurance
$962,521 $965,144 $895,063
WORKERS’
COMP.
State-required Worker’s Comp contribution
$2,637,464 $2,143,288 $1,647,058
INSURANCE
Other insurances
$49,182 $49,316 $49,429
TOTAL $14,785,863
$13,173,101
$10,802,863
We continue to believe our approach and practices are in the best interest of the district. Further, we have
always operated in a good-faith manner in full compliance with NYS laws.
The District is currently in a sound financial position, but we remain cognizant of significant fiscal
challenges on the horizon, includingthe LIPA Tax Cert and the 2% Tax Levy Cap.