State faults school district on finances; Superintendent acknowledges concerns

The office of New York State Comptroller Thomas DiNapoli has given the Shelter Island School district its financial report card, and it wants it to hit the books.

In a state-sponsored audit, the comptroller found the district has been piling up reserve funds in its budgets by appropriating a surplus fund balance of $1.7 million from 2015 though 2018, and had not used it.

The findings of the audit could affect how the state helps fund the district. State aid to local governments and school districts have become a wait-and-see issue since Gov. Andrew Cuomo indicated there might be cuts as high as $8 billion in state funding. This is due to a loss of tax revenues when the COVID-19 coronavirus pandemic forced the shutdown of businesses.

The Island’s school district is currently funded by an $11.9 million budget.

The comptroller’s report said the district had:

• Surplus fund balance levels that exceeded the statutory limit by at least 5.4 percentage points from fiscal years 2015-16 through 2018-19.

• Annual budgets that had overestimated appropriations by an average of $685,822 (6%) from 2015-16 through 2018-19. As a result, $1.7 million in the appropriated fund balance was not used to fund operations during this time.

• The unemployment insurance reserve was overfunded and the Employee Benefit Accrued Liability Reserve (EBALR) was not established by a Board of Education resolution.

• District officials have not appropriately prepared or implemented corrective action plans (CAPs) to previous audits.

The comptroller’s report also noted multiple turnovers in leadership in the district of 213 students and 95 employees. There have been four superintendents in the last six years and, over the past five years, three business leaders, or individuals who act as an assistant to the superintendent in financial matters.

The comptroller’s report called on the district to:

• Reduce the surplus in the fund balance to comply with the statutory limit.

• Adopt budgets that include reasonable estimates for appropriations and discontinue appropriating a surplus fund balance that is not needed or used to fund operations.

• Create CAPs in response to external audit reports that indicate who will implement the recommendations and identify when each is expected to be implemented.

• Review the unemployment insurance reserve and determine whether the balance is necessary and reasonable. Adopt a resolution that establishes the EBALR.

Superintendent of Schools Brian Doelger, Ed.D., acknowledged in a letter to the comptroller’s office after the audit was completed that “we need to reform several of the business management functions” of the district.

Mr. Doelger wrote that he had reorganized the business office and “created a better budgeting process that will lower the appropriated fund balance and will provide more accurate projections of budget estimates.”

In his letter, the superintendent said he has begun “the process to have the Board of Education adopt a plan for our EBLAR and employment reserve funds …” He said the district will be “asking the voters to create a Repair Reserve Fund … to be funded through excess fund balance.”

Mr. Doelger told the Reporter that fund balances are different for a small district, such as Shelter Island, and cited an example of possible unexpected costs of special education students who have to be enrolled off-Island and travel expenses can be steep.

There has not been a business leader for the district since November of last year, but Mr. Doelger said that post has been covered by an outside consultant, which is less expensive and more effective.

He also noted that a rainy day fund is not an altogether negative thing when the unexpected happens “like a pandemic, for example.”

As for multiple turnovers of superintendents, Mr. Doelger acknowledged in his letter to the comptroller that it has “made it difficult to create and implement long-term financial plans. The Board of Education and I are hopeful that we will experience better stability in the coming years in an effort to address the concerns you cite in your report and corrective action plans.”