Audit finds Pine Valley has unexpended surplus funds

SOUTH DAYTON – The Pine Valley Central School has not managed its annual budgets and fund balances properly, according to a New York State Comptroller Thomas DiNapoli. According to a recent audit report from the comptroller’s office, the district had an excess of $2.4 million that should have been used to benefit taxpayers, in addition to reserve accounts not maintained in accordance with statutory requirements.

By overestimating appropriations, the district has overestimated by a total of $6.3 million for five fiscal years in turn generating $1.36 million in operating surpluses. The unexpended surplus exceeded the limit by 4.25 percent or approximately $638,000; the Real Property Tax Law limits unexpended surplus fund balance to 4 percent. Any amount over this percentage should be used to pay off debt, finance expenditures, and establish and fund reserve funds. Records show the district’s unexpended surplus funds was 8.25 percent of the 2013-2014 budgeted appropriations.

By exceeding the 4 percent limit, the audit has found the district put a higher tax burden on its taxpayers, according to the audit. Three district reserve funds were also found to be overfunded.

The employee benefit accrued liability reserve was found to be overfunded by 81 percent while the retirement contribution reserve total amount of $727,000 represented over three times the district’s five year annual average cost. The insurance reserve was found to have a balance of $80,000 since prior to the 2008-2009 school year.

The audit also found the district allegedly did not always obtain verbal or written quotes prior to procuring goods or services. The audit reviewed 21 procurements of goods and services totaling over $114,000 and found 12 purchases – totaling $66,804 – were obtained without competitive bid. According to the audit, 12 purchases were made without obtaining quotes, while quotes for automotive filters and carpet purchases were obtained properly but the quotes were not properly retained.

“For example, during 2012-13, District staff purchased paper towels totaling $8,262 and tires totaling $5,193 without obtaining three written quotes from vendors as required. In addition, District staff obtained only two of the three quotes required for the installation and purchase of computer lab counters costing $4,200 and did not retain quotes District staff indicated it obtained for carpet and automotive filters totaling $3,508,” the audit states. “Under these circumstances, the District cannot ensure that goods and services are procured in the most economical manner and in the best interest of taxpayers.”

Based on the audit findings, the OSC has recommended the district “develop and adopt budgets that include realistic estimates for appropriations based on contractual and historical data;” stay within statutory limits for the unexpended surplus fund amounts; revise its reserve fund policy to address the need for maintaining funding levels and conditions how the funds will be used and/or replenished; and the district should develop a plan for using reserve surplus balances that benefit district taxpayers in compliance with statutory provisions. The district should also review its procurement policy and have “strict adherence” to the policy.

The district responded to the audit’s finding and were included in the final report. The district has maintained a tax levy of no increase over a five-year period due to “effective budgetary approach.” The response also states the district has had a conservative approach to the budget process so taxpayers would not be subjected to fluctuating tax rates.

“The District will continue to identify ways to effectively approach its budget development and implementation in order to provide a quality educational program with limited financial resources,” the response stated.

The district also says it keeps reserves as “savings accounts” for any future needs and there is no statutory limitation on the reserve balance. The district will continue to ensure operation of the fund reserves is consistent with a fund policy outlined by the district. Pine Valley also stated that they did not find any financial irregularities in the procurement policy or procedures. The district will continue to work on strengthening the procurement policy, as stated in the response.

To view the full audit, visit

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