Comptroller: Pandemic could slow school financial compliance

The COVID-19 pandemic bought time for the Shelter Island School District to get its finances in order, according to a spokesperson for the Office of the State Comptroller. Now, the district has completed a number of improvements that a 2020 Comptroller’s Report had ordered, according to Superintendent Brian Doelger, Ed.D.

When the report was issued in the spring of 2020, it was well into the budget season and, because of the COVID-19 pandemic, major changes were not expected to take place, according to Tania Lopez , deputy press secretary for the Comptroller’s Office.

“We would not have expected the district to take significant steps to reduce fund balance with the pandemic in force,” Ms. Lopez said in response to questions from the Reporter about whether the Comptroller’s Office was satisfied that the district was moving to comply with instructions in the original report. “It’s too soon to assess corrective action,” Ms. Lopez said.

She noted that school districts are required to have an annual CPA audit conducted that “almost always includes an assessment of the level of fund balance.”

The surplus unassigned fund balance was the most critical part of the 2020 report issued by the Comptroller’s Office, which cited $1.7 million, accumulated over a period from 2015 to 2018, that should have either been returned to taxpayers or placed in funds for specific purposes. By placing all the money in the unassigned fund balance, the Comptroller’s Report estimated a fund meant to be limited to 4% of a district’s budget exceeded what was allowable by at least 5.4 percentage points.

In August 2020, the Board of Education approved transfers of money into special reserve funds to reduce the unassigned fund balance account, while helping to fund future activities. One of those accounts, a voter approved Repair Reserve Fund, will pay for a nitrogen-reducing I/A septic system replacing three aged existing systems that serve the school.

Other specific funds have been created and money has been transferred to those as well.

While acknowledging the existence of an over-funded unassigned fund balance account, Mr. Doelger pointed out that small districts have maintained that the allowable 4% is often too low to deal with unanticipated expenses. One such district, New Suffolk, had to return to taxpayers for more money several years ago after passing its budget before it knew a high needs special education student was transferring into the district at an approximate cost of $100,000.

The Shelter Island district spent money to make its building safe for students in 2020 by having an effective ventilation system installed, along with extra sinks so students and staff could more frequently scrub their hands to avoid transmission of COVID-19. Shelter Island was one of the few school districts in the state able to hold in-person classes almost every day because of the precautions that were taken, Mr. Doelger said.

Feeding into the issue of the unassigned fund balance was the Comptroller’s finding that the district was overestimating its budgeted expenses.

There had been several transitions in the business office, which accounted for part of the problem, Mr. Doelger said. The district, in preparing its 2020-21 budget, tightened controls to ensure budgets would be more in line with actual expenses.

Another criticism in the Comptroller’s Report was the possibility that the district was over-funding its unemployment reserves. That needed to be brought into line by a Board of Education resolution to establish what’s called the  “employee benefit accrued liability reserve,” and better determination of how much money should go into that fund. The process of determining the funding year-to-year is ongoing, Mr. Doelger said.