PORT JERVIS, N.Y.—According to a newly released audit by the State Comptroller’s Office, the Port Jervis School District in New York consistently levied millions of dollars more than needed of property taxes and thereby put an unnecessary burden on taxpayers.
During the past four fiscal years, the district overestimated spending by an average of $5.8 million a year, resulting in surpluses that were three to five times the statutory limit, the report says.
According to the report, the district also engaged in opaque transfers of surpluses, or fund balances, to fill up reserve funds—a practice that should have been explicitly disclosed to taxpayers in the budget votes.
The district superintendent generally agreed with the audit findings, according to a district letter addressed to the state comptroller’s office on Nov. 1.
The district is due to submit a corrective action plan in 90 days and implement the plan by the end of the next fiscal year.
The State Comptroller’s Office has issued financial management audits of 23 school districts this year, according to a spokesperson with the office.
Almost all failed to effectively manage their financial conditions, a review by The Epoch Times found.
Consistent Overestimates of Spending
The report finds the district overestimating spending in five major categories: teacher salaries, transportation costs such as buses, health insurance, retirement, and student tuition costs for Board of Cooperative Educational Services (BOCES) classes.
The above items accounted for 67 percent of total overestimates over the past four years.
Hamilton Bicentennial Elementary School in Cuddebackville on Oct. 9, 2022. (Chung I Ho/The Epoch Times)This year, the district overestimation is projected to be $8.7 million.
The former superintendent said the overestimation was to give room for unexpected salary and health insurance jumps, but the audit team concluded it improper to do so year after year, according to the report.
The former superintendent also cited the COVID-19 pandemic, which he said caused the school shutdowns and reduced the transportation costs and BOCES tuitions.
However, according to the report, the district was already overestimating spending before the pandemic.
State auditors put the overestimates for the 2017–18 and 2018–19 fiscal years at $3.2 million and $5.1 million, respectively.
The report further recommends that the district adjusts spending estimates to reflect the realities.
The former superintendent left the district this summer to serve as superintendent at the Marlboro Central School District.
Opaque Transfers of Fund Balance
The state auditors in their report allege that in order to drive down surpluses, the district engaged in a practice of making year-end transfers from fund balances to reserves and capital project funds.
For example, between 2017 and 2021, the school board approved year-end transfers totaling $2.7 million from the fund balance to the employee benefits and capital project reserves.
These transfers hadn’t been put out to vote for taxpayers the auditors say.
The former superintendent said it was a long-term practice that his administration inherited, but the audit team said the tradition should be discontinued for the benefit of taxpayers, according to the report.
Despite the transfers, overestimated spending resulted in annual fund balances that accounted for between 15 percent and 23 percent of next year’s estimated spending—well above the 4 percent statutory limit under state law.
The district assistant superintendent for business told the audit team that a fund balance of 4 percent wasn’t enough to equip the district against major financial emergencies, according to the report.
He also said the fund balance increased because of unplanned state and federal aid during the pandemic.
However, the audit team concludes the surpluses weren’t driven by revenues but by excessive estimates of expenditures.
The report says given the growing surpluses, the district should have lowered the tax levy as opposed to maintaining the same tax levy throughout the years.
Other recommended practices are funding one-time expenditures and paying off district debts.
Improper Management of Reserves
The report also states it found that the school board failed to spend reserve funds for intended purposes.
Between 2017 and 2021, the district paid about $900,000 in worker’s compensation claims with money from the general fund, despite having enough balance in the worker’s compensation reserve.
The district treasurer said it was a long-term practice and the current administration simply inherited it, but the audit team questioned the tradition, according to the report.
The practice, in essence, uses property tax money to cover expenses that could have been paid for otherwise, the report states.
In addition, the audit team found a dormant capital reserve fund established in 1993 for a now-concluded project.
The fund has a balance of $1.3 million.
The district treasurer told the audit team that the district consulted an attorney and didn’t find a proper way to liquidate capital reserve funds following project completion.
The audit team concluded that the district lacks a sound reserve fund policy.
The Epoch Times reached out to the district superintendent, school board president, and board vice president for comments but received no response by press time.
Cara is an Orange County, New York-based Epoch Times reporter. She can be reached at cara.ding@epochtimes.com
