Northport-East Northport Union Free School District – Financial Condition (2014M-164)

Issued Date
October 10, 2014

Purpose of Audit

The purpose of our audit was to evaluate the District’s financial activities for the period July 1, 2012 through September 30, 2013.

Background

The Northport-East Northport Union Free School District is located in the Town of Huntington, Suffolk County. The District is governed by the Board of Education (Board) which comprises nine elected members. The District operates nine schools and has approximately 6,200 students and 1,680 employees. For the 2013-14 fiscal year, the District’s operating budget is approximately $156.6 million.

Key Findings

  • District officials consistently presented, and the Board approved, budgets which significantly overestimated appropriations over the five-year period. As shown in Table 1, District officials overestimated expenditures by as much as $9.3 million each year, for a total of almost $34 million from the 2008-09 through the 2012-13 fiscal years.
  • The Board also has not adopted a policy or plan for accumulating and using reserves funds to ensure that the amounts are necessary, reasonable and in compliance with statutory requirements.
  • Appropriations were not included in the original budgets and the budgets were not revised during this period to provide for the year-end increases made to the retirement contribution reserve fund. Instead, the Board passed general resolutions to fund this and other reserves with operating surplus after each fiscal year ended. As a result, these transfers were made without sufficiently informing residents of the District’s intent to increase reserve funds during the budget process.

Key Recommendations

  • Develop procedures to ensure it adopts more realistic budgets to avoid raising more real property taxes than necessary. Discontinue the practice of adopting budgets that result in the appropriation of unexpended surplus funds that are not needed to fund District operations.
  • Develop a formal plan indicating how reserves will be funded, how much will be reserved and when reserves will be used.
  • Ensure that budgets presented to the voters for approval are transparent and inform residents of their intent to increase reserves by including an appropriation that quantifies such increase.