Taxpayer Concerns Raised Over Audit Of District

By Andrew Wroblewski

awroblewski@longislandergroup.com


Marylou McDermott, Superintendent of the Northport-East Northport School District, presents to a crowd at a special school board meeting on Oct. 15 her interpretation of an audit released by the State Comptroller office of the district.

Marylou McDermott, Superintendent of the Northport-East Northport School District, presents to a crowd at a special school board meeting on Oct. 15 her interpretation of an audit released by the State Comptroller office of the district.

Between spouts of rain dribbling from the sky and roaring gusts of wind – it wouldn’t be surprising if one of those attending a special meeting on Oct. 15 called for by the Northport-East Northport School Board to discuss an audit of the district released by the State Comptroller office had been running a bit late in making it there.

If they had been – even if by an hour – then they would have witnessed a completely different meeting.

On one hand, the School Board began with its defense against the audit – released Oct. 10 – that criticized the district for overestimating budget appropriations by nearly $34 million over a five-year period from the 2008-09 to 2012-13 school years. Other findings raised concerns over the district’s use of an assigned fund balance while operating in a surplus, and maintaining an excessively high balance in its retirement contribution reserve.

A slideshow presentation illuminated a screen in the front of the William J. Brosnan School’s cafeteria and Superintendent Marylou McDermott calmly took to a podium alongside Kathleen Molander, assistant Superintendent for business, to precisely explain what they deemed to be a difference in “budgeting philosophy.”

Kathleen Molander, Northport-East Northport School District assistant superintendent for business, speaks alongside Superintendent Marylou McDermott in a special presentation.

Kathleen Molander, Northport-East Northport School District assistant superintendent for business, speaks alongside Superintendent Marylou McDermott in a special presentation.

“For the last several years, the district’s philosophy has been ‘Serving Today, Protecting Tomorrow,’” McDermott said. “Part of that, even though districts are only allowed to budget for one year at a time, we are very cognizant of the liabilities in our district down the road.”

With this philosophy, McDermott explained, the district takes into consideration several factors when putting together a budget: projected student enrollment and the prior year’s expenditures; any viable spending reductions; and, finally, using any unspent funds to lower the tax levy and fund its reserves – which it is legally permitted to do.

“Think of your own budget,” McDermott said. “Let’s say you set aside $500 for [a] fuel bill. Wouldn’t you be happy if you were successful in that underspending so that maybe you could apply that, maybe, to your child’s 529 account for college?”

The disparity between the State Comptroller and school district administration’s thinking comes over the district overestimating expenditures for special education, benefits and debt services, and rolling the unspent funds into the following year’s budgets as reserve funds. According to the comptroller’s reports, “New York State Real Property Tax Law requires that unexpended surplus funds not exceed 4-percent of the ensuing year’s budget appropriations.”

McDermott and Molander’s presentation stated, “There are sound reasons.”

Cost fluctuations after budget adoption; differences between the calendar and fiscal year; and anticipation of settlement monies were the cause of over-budgeting across the three areas; the two explained.

Board members were unanimous in their support.

“I’ve never been shy of criticizing the administration when I think they do things wrong, but here I can’t say how much the administration has done right,” Trustee David Badanes said. “I personally think the comptroller is completely wrong, completely flawed… I think they’re taking a glass that’s 99 percent full and calling it half-empty.”

Applause from the crowd on Oct. 15 was not uncommon as several parents, teachers and other taxpayers voiced their concerns with the way the district is handling the audit.

Applause from the crowd on Oct. 15 was not uncommon as several parents, teachers and other taxpayers voiced their concerns with the way the district is handling the audit.

But not all of the nearly 100 audience members agreed.

“[The people at the comptroller’s office] are not jerks, they’re not idiots; they’re CPAs, they’re accountants and they know what they’re talking about,” Joseph Sabia, a former board member, said. “The bottom line is we [taxpayers] loaned this school district $34 million and you billed [us] 2 percent on the money [we] loaned you.”

Sabia, along with several other speakers, maintained that what was released in the audit had been brought to the board’s attention in the past. People like Sabia and Armand D'Accordo, a Northport resident, raised concerns in letters and emails and at school board meetings.

“You [the school district] can cut this any way you want… But what you’re doing is wrong; you are overtaxing the community,” D’Accordo said. “You talked earlier how about when you do your budget you look to try to find savings and sock it away… That’s exactly right; the public would like to have that money to spend, not you.”

McDermott, Molander and School Board President Julia Binger responded to both the audit as a whole and subsequent public outcry in an Oct. 14 letter to Long Islander News. In the letter, the trio stands by its budgeting approach, calling it both “practical and smart” due to is addressing of issues specific to the district.

“Let’s not lose sight of the fact that in the end, any and all of the surplus will, in fact, make its way back to the taxpayers by lowering the tax levy in current or future budgets,” it reads. “We are just moving a bit more deliberately, and cautiously, than the Comptroller would like.”


THE COMPTROLLER’S RECOMMENDATIONS

 

In its audit, the comptroller’s office recommended the district take five steps to resolve the issues:

  • 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 fun 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 appropriations that quantifies such increase;
  • Reconsider the funding limit established for the retirement contribution reserve fund to reflect a balance that is in line with the actual retirement contribution expenditure trends.”