Published: December 05, 2008 02:03 am            

CITY OF LOCKPORT: State comptroller's audit faults school finances

Lockport Union-Sun & Journal

The state comptroller’s office on Thursday released the results of an audit that determined the Lockport City School District overestimated expenses and underestimated revenues by $9.4 million over the past five years.

The discrepancies resulted in surpluses that could have been used to reduce property taxes in the district, State Comptroller Thomas DiNapoli said.

The audit, which covered the district’s finances from July 2006 to May 2008, found the district increased the tax levy by 11 percent in the 2002-03 fiscal year, at the same time creating five new reserve funds and increasing the amount of funds in a sixth reserve.

The audit concluded the district should eliminate what it called “unnecessary funds” and use the surplus money to lower the district’s tax rate.

“Everyone wants to save for a rainy day, but it is unacceptable for school districts to hold money at the expense of taxpayers,” DiNapoli said in a news release. “The Lockport City School District needs to eliminate unnecessary reserve funds and use the surplus money to reduce the district’s property tax burden.”

Superintendent Terry Ann Carbone said the district will abide by

the recommendations of the audit, but added she wanted to “personally applaud” the previous boards of education going back to the 2002-03 fiscal year “for having the good sense to develop and maintain these reserves.”

“At a time like this, these reserves are going to be a lifesaver,” she said. “Thank goodness Lockport had the foresight to put some money away for a rainy day, because in the next budget, it will be raining.”

RESERVE FUNDS

Since their creation, the five reserve funds have not been used, the audit said. The sixth reserve was used in the 2004-05 fiscal year to pay for debt service, and the balance in that reserve in June 2007 was $2.28 million.

The reserve funds include:

•

Worker’s compensation

, which started in the 2002-03 fiscal year with $400,000. With interest, it grew to $463,200 in June 2007

•

Unemployment insurance

, which started with $75,000 and with interest and additional allocations has grown to $115,000

•

Insurance

, which started with $750,000 and has grown to $866,200

•

Tax certiorari

, which started with $400,000 and has grown to $698,831

•

Employee benefit accrued liability

, which started with $2 million and has grown to $3.6 million.

“Since no justification could be provided ... for reporting this substantial amount of resources in this manner, these moneys should be transferred to unreserved fund balance in the general fund and used to reduce the property tax levy,” the audit said.Concerns and recommendations

The audit also identified “numerous concerns” with the district’s transportation contractors and consultants, including a concern that the district did not properly monitor these contracts.

The district hired a transportation consultant to monitor its transportation contracts, the audit said, but the consultant shared the same headquarters and the same company president as one of the two transportation contractors.

“This direct relationship makes the consultant an inappropriate monitor of the transportation contractors,” the audit said.

Carbone said the district has now hired Transportation Advisory Services, a Central New York-based company, “to investigate and give the board of education recommendations as to cost savings to our transportation plan.”

The district’s primary transportation provider is Ridge Road Express.

“We’ve had a very good relationship with Ridge Road Express, and we hope to maintain that,” Carbone said.

The audit also found “a lack of segregation of duties” in the district’s Trust and Agency Fund, which had a reported balance of $233,744 in June 2007.

The Trust and Agency Fund included the group health insurance account, which was singled out by the audit. The audit named several areas of concern, including what it called a lack of checks and balances over the account management.

A response letter signed by Carbone and School Board President Marietta Schrader said the district has already taken steps to improve accounting procedures.

In the audit’s conclusion, DiNapoli’s office recommended the district should develop “realistic” revenue and expense estimates and use fund balances to reduce taxes; review all reserves and reduce amounts to “reasonable balances”; prepare multi-year financial plans; and appoint an unbiased district official to oversee transportation services.

“We are going to take these recommendations very seriously,” Carbone said.

CAPITAL PROJECT

The district’s proposed $29.5 million project, which goes to vote Dec. 16, is planned to partly be paid for with a $3 million reserve account the district started a few years ago — a fund Carbone said is not one of the six reserves included in the audit.

“That is a separate reserve,” Carbone said. “If the community does pass the capital project, we will be using that capital reserve.”

The plans for the capital project include a state-of-the-art performing arts center, art gallery and a fitness center for gym classes, a six-classroom addition, along with other smaller improvements. These items are included in the first proposition, which makes up about $23.5 million of the total project.

The second proposition includes a varsity stadium and makes up about $6 million of the project.

There will be a public meeting to discuss the project at 7 p.m. Wednesday in the high school auditorium.

Contact reporter April Amadon at 439-9222, ext. 6251.

        

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