Jan 14, 2025
Thomas DiNapoli
GOWANDA — The Gowanda Central School District received a scathing review from the New York State Comptroller’s Office in a recently released audit report.
According to the office of State Comptroller Thomas P. DiNapoli, the Gowanda Central School District and its Board of Education “did not properly manage the District’s fund balance and reserves.”
The Comptroller’s Office criticized the District for a lack of transparency regarding its financial state and avoided opportunities to lower real property taxes through a “continued practice of overestimating” what was needed to operate.
The audit issued by the State Comptroller’s Office spans from July 1, 2020 through June 30, 2023. The Comptroller claims the District consistently overestimated general fund appropriations from 2020-21 through 2022-23 by a total of $13.1 million and appropriated nearly $6.7 million of fund balance that was not needed or used. According to the report, the District overestimated its budget by 14.7% over the three-year period, beginning in 2020-2021, at an average of approximately $4.4 million per year.
The Comptroller’s Office believes the District presented an inaccurate picture to taxpayers each year. Per the audit report, “Adopted annual budgets … gave the impression that the District would have operating deficits totaling $6.7 million when it actually had operating surpluses totaling $9.9 million.”
The audit report states that rather than reducing property taxes, the District increased taxes by over $200,000 from 2020-21 through 2022-2023 even though the District had surplus funds that exceeded the amount allowed by approximately $3.6 million.
Among the line items deemed to be excessive in the yearly budgets include health insurance ($2.4 million), instructional salaries ($2.1 million), employee benefits ($1.8 million), BOCES expenditures ($747,000), transportation/custodial salaries ($649,000) and special education tutoring ($542,000).
Per the report, the District claimed health insurance rates were received once the budget was nearly developed, but the State Comptroller’s Office stated the District was given an average of 34 days of notice prior to the Board adopting the budget. The amounts budgeted exceeded actual costs by approximately $800,000 each year.
Regarding instructional salaries, the District overestimated by between $426,000 and $866,000 each year. Employee benefits were overestimated by between $530,000 and $705,000 each year. BOCES costs were overestimated by between $105,000 and $500,000 each year. Transportation/custodial salaries were overestimated by between $142,000 and $303,000. Special education tutoring was overestimated by between $108,000 and $275,000.
The District’s collective bargaining agreement with its teachers expired in June 2021 and was not resolved until May 2022.
This is not the first time the District was criticized by the State Comptroller’s Office. From the three-year period beginning in 2013-14 through 2015-16, the District overestimated appropriations by 5.5%, 7.9%, and 9.9%.
DISTRICT’S POSITION
Business Administrator Barb Smith alluded to the fact the State Comptroller’s Office was not pleased with the District at a Board of Education meeting earlier this school year. Smith stated, “I don’t think the State Comptroller’s Office agrees with our funding levels, but that’s their prerogative.”
This past fall, Smith addressed the District’s sizable fund balance figures, most notably more than $27 million in projected total fund balance and $20.7 million in restricted fund balance projected by the end of 2024. Smith is projecting a surplus of approximately $7 million in 2024.
By the end of 2023, the unassigned fund balance of the District was just shy of $6 million. Pre-pandemic figures were $1.25 million in 2018 and $1.87 million in 2019.
The District utilized its pandemic relief funding to supplement many of its expenditures in recent years. However, now with the relief funding no longer available in future years, the expenditures will revert back to the District. The District is also likely to receive less Impact Aid moving into next year because the aid has already been awarded.
“We strategically funded these reserves to pay for upcoming expenditures and lessen the impact on the taxpayer during years with significantly less state and federal aid,” Smith and Superintendent Dr. Robert Anderson said in response to the Comptroller’s report.
According to Smith, prior to the pandemic in 2019, the District had a total fund balance of $7.85 million, including $3.92 million in restricted funds. The total fund balance jumped to $12.29 million in 2020, then continued to rise each year. In 2023, the District finished with a total fund balance of $20.36 million, with just a tick below $13 million of that money being restricted funds.
“Based on our calculations, none of the reserves were overfunded at the end of 2023,” Smith and Anderson stated.
Smith and Anderson also disagree with the Comptroller’s statement that the District is not transparent with its budgetary practices, citing that the information is discussed openly at budget workshops and meetings – which are posted on the District’s Facebook page – and information is available on the District website.
“When developing the upcoming budget, we will include the estimated use of reserves to provide additional transparency beyond what we already do,” Smith and Anderson stated in response to the report.
Smith also noted that by saving such a substantial amount of funds, the District has generated nearly $500,000 in interest.
“They seem very more short-sighted than we are,” Smith said of the Comptroller’s Office this past fall. “We’re looking ahead, knowing with Foundation Aid, we don’t know what that’s going to look like. We have surpluses these years, so in the future years, that’s why we have these. They are savings accounts, they are meant to be spent in future years.”
This past year, the Gowanda Central School District received an unmodified opinion regarding its financial statements in the District’s external audit, from Drescher and Malecki LLP for the period ending June 30, 2024. The only comment against the District was regarding its substantial fund balance, which the District has intentionally built up starting in the 2019-2020 fiscal year.
With a capital project proposal eyed next year, the District hopes to utilize its substantial fund balances to fund the project without any impact on taxpayers. Among the needs of the District is a plan for the pool, which just revealed substantial issues after undergoing an emergency repair.
The District stated in response to the Comptroller’s Audit that the 2019 Capital Reserve Fund will be used to fund a project next year. As of June 30, 2023, the 2019 Capital Reserve Fund maintained a balance of $2.3 million.
In conclusion, Smith and Anderson responded, “We believe our responsibility is to ensure the long-term financial stability for the District’s residents and students and have done a good job at it. We have built up funds to endure tough economic times so that we do not have to reduce services or opportunities provided to our students.”
Moving forward, the District “will review reserve balances and look into developing a more formalized written plan to supplement the current plan and discussions, including a spending plan if appropriate.”
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