State: Pine Valley overestimated spending
The state Comptroller’s Office says the Pine Valley Central School Board of Education overestimated spending by $3.2 million over three years and is carrying far too much money in its fund balance.
The audit states the board overestimated spending by $3.2 million and, as of June 30, 2018, had $2.4 million in its fund balance, exceeding the statutory limit by more than $1.8 million.
Auditors said the most significant overestimated lines in the budget were for employee benefits (an average of $724,000 over three years) and personal services (an average of $378,000 over three years). District officials said the previous method of budgeting used a standard percentage increase throughout the budget based on a forecasted increase in spending.
The district changed that method in the 2018-19 budget, using a trend analysis of past spending to budget appropriations. That new method led to a 3% decrease in spending in the 2018-19 budget with the district not increasing property taxes or using the fund balance.
“However, historically revenues have exceeded expenditures and although there is a reduction in appropriations, officials are projecting an operating surplus of approximately $500,000,” the auditors wrote. “Therefore, fund balance will continue to increase and surplus fund balance will likely continue to exceed the statutory limit. District officials also told us that unsettled collective bargaining agreements have played a role in overestimating appropriations because they included anticipated retroactive payments in each year’s budget.”
District officials told auditors they were trying to maintain as much of a fund balance as possible because they project operating deficits starting in 2021-22 that start at $31,000 a year and grow to almost $1.8 million in 2028-29. Auditors said those projections don’t appear to be reasonable due to underestimated revenue figures used by district officials in those projections.
The district has adopted a fund balance policy that aims to keep the fund balance from 4-6%.
“After we discussed the plan with the Business Executive, it was updated to include a more reasonable projection for revenues that showed smaller operating deficits in future years. The audit recommends adopting budgets that more reasonably estimate spending and reducing the district’s fund balance,” the auditor wrote.
Auditors suggested developing a plan to comply with the state’s limits on a district’s fund balance that include paying one-time costs, funding needed reserves, paying off debt or reducing property taxes.
The district agreed with the auditor’s findings in its response.